On Tuesday afternoon (4 June), the Reserve Bank announced that it was dropping the official cash rate for the first time in almost three years in order to “support employment growth and provide greater confidence that inflation will be consistent with [its] medium-term target”.
While many lenders had reduced interest rates in May, following the official cash rate reduction, several lenders immediately announced further rate reductions across standard variable rates (SVRs) on their mortgages.
Commonwealth Bank and National Australia Bank both committed to reducing their SVRs by 25 basis points, as did Athena Home Loans and Auswide (for its rate tracker mortgage and credit card).
On Wednesday (5 June), several more lenders announced that they too would be passing on the full rate reduction to borrowers.
Macquarie Bank announced that it would be passing on the 25 basis point cut from Friday, 21 June.
This would take the owner-occupier SVR with those with a loan-to-value ratio (LVR) of less than 70 per cent to “Macquarie’s lowest ever” – at 3.44 per cent.
ING has also announced that, effective from 25 June, it will decrease all ING variable rate home loans for both new and existing customers by 25 basis points.
The new variable rate for borrowers with a 20 per cent deposit applying for a Mortgage Simplifier OO P&I loan will be 3.38 per cent (assuming they’re borrowing between $150,000 and $1 million) while those borrowing over $1 million will see rates drop to 3.34 per cent.
The new variable rate for people applying for an Orange Advantage OO P&I iwill be 3.43 per cent (or 3.39 per cent for those borrowing more than $1 million).
Building society Newcastle Permanent also announced that it would pass on the full RBA rate from Monday, 17 June across owner-occupier, investment and business loan products.
Currently, the lender’s Premium Variable Home Loan starts from 5.35 per cent p.a.
It said that customers will be notified of their new repayments directly, but represents an approximate saving of $53 per month for customers with a $350,000 home loan over 30 years, or $15 per month for every $100,000 borrowed over the same term.
Acting CEO Mark Williams commented: “For more than 110 years, we’ve made home ownership possible for everyday Australians, and we continue to offer consistently fantastic value to home buyers. Customers of the major banks continue to realise they come second to shareholders’ dividends – while we’re proud to remain customer-owned and customer-focused.”
“Customers may choose to maintain the amount they pay off their home loans, effectively paying off their loan balance sooner, or enjoy the benefit of some extra space in their monthly budget,” he said.
Likewise, customer-owned Greater Bank also said it would reduce variable interest rates this month (from Tuesday, 11 June) across a number of lending products for owner-occupiers, investment and business loans; however, this follows on from a rate increase last month, when variable rates rose by 0.10 per cent to “balance the needs of all our customers, both depositors and borrowers”.
However, Greater Bank CEO Scott Morgan said the lender would now move quickly to pass on the full 25 point reduction to borrowing customers.
“There has been speculation recently about the prospect of a reduction in the official cash rate by the RBA, which is a significant factor when considering changes to our interest rates, but certainly not the sole factor,” Mr Morgan said.
“Costs associated with funding and servicing loans, ensuring we continue to meet regulatory responsibilities, as well as balancing the interests of both Greater Bank’s borrowers and depositors have to be considered.
“We will watch with interest now as other financial institutions move on interest rates and by how much. We are confident that Greater Bank remains very competitive in the market, especially against the major banks.”
Despite imploration from RBA governor Philip Lowe for the banks to pass on the full rate – and criticism from the Treasurer Josh Frydenberg for those not doing so – several lenders have decided not to pass on the full amount.
Following the announcement from ANZ and the Westpac group (BankSA, Bank Melbourne, St George and RAMS) that they would only reduce rates by 18 basis points and 20 basis points, respectively (however Westpac has dropped investor interest-only SVRs by 0.35 per cent), Suncorp Bank has also announced it will cut all variable home loan interest rates by 0.20 percentage points, effective 21 June.
It will reduce its variable home loan interest rates by 20 basis points for owner-occupiers and investors effective 21 June 2019 – but will drop business loan rates by the full amount.
Speaking of the decision, Suncorp CEO, banking and wealth, David Carter said: “In the last few months, we have made significant investments in our lending processes and customer experience to make buying a home easier and more affordable for our customers.
“But we also recognise there are just as many, if not more, Australians who rely on the income of their savings to support their living expenses, particularly retirees, and falling rates is going to impact them.
“This has been a significant consideration in our decision today, and why we can continue to provide competitive rates for our deposit customers.”
Noting that the Small Business Essential Loan will drop by 0.25 percentage points per annum, he added: “Supporting small businesses across the country is one of the most important things we do because when local businesses succeed, local communities thrive.”
Meanwhile, BOQ has said that all but one of its variable rate loans will drop by 25 basis points.
Effective from 25 June 2019, all BOQ SVRs will drop by 0.25 per cent with the exception of the Clear Path OO P&I home loans, which will drop by 15 basis points.
“We are pleased to pass on the RBA’s rate cut in full to the majority of our BOQ customers, said Lyn McGrath, group executive of retail banking.
"In making this decision, we have taken into account a number of significant factors, including the current funding and regulatory environment, as well as the broader economy.
“We believe the responsible decision at this moment in time is to get behind our home lending customers and ensure they enjoy the benefits of reduced cost of funds.”
She concluded: “We want our customers to know that we are absolutely invested in their financial security and prosperity. Supporting Australian families to more comfortably manage their home loan repayments is an integral part of delivering on this commitment,"
Virgin Money has also announced that it will be cutting interest rates across all variable home loans for existing owner occupiers and investors, but by 22 basis points (bps). These changes will take effect on Tuesday, 25 June 2019.
Virgin Money’s general manager, lending, cards & deposits, Johnny Lockwood, commented: “We want our existing home lending customers to see the benefit of the reduced cost of funds quickly, and hope this will go some way towards easing the financial pressure of owning a home and, in some cases, create opportunities for our customers to own their homes sooner.
“We’ve carefully considered a range of significant factors in making this decision, including our customers’ expectations, the funding and regulatory environments, our operating costs and the global economic outlook.”
It is expected that more lenders will announce rate cuts in the coming days.
Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.