Major bank drops home loan rates

NAB has announced fixed mortgage rate cuts for both new and existing customers across its Tailored Home Loan (Choice Package) for both owner-occupiers and investors.

The rate changes, effective from 18 April, are as follows:

• Owner-occupied principal and interest fixed rates have been cut by up to 10bps, with rates now starting from 3.79 per cent
• Owner-occupied interest-only fixed rates have been cut by up to 10bps, with rates now starting from 4.29 per cent
• Investment principal and interest fixed rates have been cut by up to 20bps, with rates now starting from 3.89 per cent
• Investment interest-only fixed rates have been cut by up to 36bps, with rates now starting from 4.09 per cent

Virgin Money follows suit

Bank of Queensland (BOQ) subsidiary Virgin Money has also announced fixed rate cuts across its owner-occupied and investments home loan products.  

Virgin Money’s rate changes, also effective from 18 April, are as follows:

• Owner-occupied principal and interest fixed rates have been cut by up to 40bps, with rates now starting from 3.69 per cent (3.90 comparison rate)
• Investment principal and interest fixed rates have been cut by up to 40bps, with rates now starting from 3.89 per cent (4.17 per cent comparison rate)
• Investment interest-only fixed rates have been cut by up to 30 bps, with rates now starting from 3.89 per cent (4.14 per cent comparison ate)

“We want to help our customers reach their home ownership dreams without having to compromise on their lifestyles. So, we’ve positioned our rates competitively, offering both flexibility and value regardless of whether they’d prefer a variable and/or fixed rate home loan,” Virgin Money’s general manager, lending, cards and deposits, Johnny Lockwood, said.

NAB and Virgin Money are the latest lenders to cut its fixed mortgage rates, with Heritage Bank, Westpac, the Commonwealth Bank and Bendigo Bank also announcing reductions of up to 40bps over the past few weeks.

Macquarie Bank, ME, HomeStart Finance, Teachers Mutual Bank and Adelaide Bank have also reduced their fixed rates by up to 92bps over the past few months. According to Steve Mickenbecker, finance analyst at comparison website Canstar, the changes have come off the back of easing funding cost pressures.

“With the significant fall in wholesale funding costs since the start of 2019,  lenders have had the opportunity to invest the fattening margin in acquiring new business,” he said.

The out-of-cycle rates changes have come despite monetary policy inertia from the Reserve Bank of Australia (RBA).

However, some analysts, including AMP chief economist Shane Oliver and NAB chief economist, markets, Ivan Colhoun, expect the RBA to drop the cash rate over the coming months, in response to weak credit and housing market conditions and subdued wage growth.

According to the Australian Finance Group’s (AFG) latest Mortgage and Competition Index, which involves a survey of its broker network, lending volumes fell by 10 per cent nationwide in the three months to 31 March 2019 (3Q19), from 25,536 to 23,049 – the lowest quarterly figure reported in six years.

When compared to the previous corresponding period, mortgage volumes declined by 15 per cent from 27,726 in the three months to 31 March 2018.  

The total value of mortgage lodgements also declined, falling by 10 per cent ($1.3 billion) quarter-on-quarter, from $12.9 billion to $11.6 billion, and by 16 per cent ($2.2 billion) from $13.8 billion in the previous corresponding period.

According to AFG, the $11.6 billion in volumes recorded over 3Q19 was the lowest quarterly figure since 2014.

[Related: Bank cuts mortgage rates by up to 40bps]