Lenders have begun to announce reductions to their variable mortgage rates in response to the Reserve Bank of Australia’s (RBA) decision to lower the official cash rate to a new record low of 1 per cent.
Despite half of the big four banks passing on the full cut last month, just ANZ has agreed to do so this time.
This comes following ANZ copping criticism from the federal Treasurer last month when it withheld some of the rate cut.
ANZ was the first major bank to reprice its home loans following the RBA’s move, this time opting to lower its mortgage rates by the full 25bps, effective from 12 July.
The changes will to apply to all variable rates across its owner-occupied and investment home loans, which means:
- For standard variable rate owner-occupiers paying principal and interest, the index rate will drop to 4.93 per cent, down from 5.18 per cent
- For standard variable rate owner-occupiers paying interest-only, the index rate will drop to 5.48 per cent, down from 5.73 per cent
Echoing comments he made following the bank’s decision to pass only 18bps of last month’s 25bps cut, ANZ group executive, Australia retail & commercial, Mark Hand said: “We looked at a number of factors before reaching this decision, including business performance, market conditions and the impact on our customers.
“On balance, we believe this is the right decision for our home loan customers and for our business.”
The Commonwealth Bank of Australia (CBA) has not passed on the full 25bps reduction to owner-occupiers and investors paying principal and interest, instead announcing a 19bps cut.
However, owner-occupied and investment home loan customers paying interest-only will receive the full 25bps reduction.
Angus Sullivan, group executive retail banking services, said the bank considered the implications on its savings customers when determining whether to pass on the full cut across all of its mortgage products.
“With official interest rate settings already at record lows, we are focused on balancing the benefits and the costs of further interest rate reductions between our 1.6 million home loan and over 6 million savings customers,” he said.
“We have carefully considered how to respond to this latest official interest rate cut, given that it is not possible to pass on the full rate reduction to over $160 billion of our deposits, including deposits where interest rates are at, or already, near zero.
“We have made a deliberate choice to limit the interest rate reduction to 0.15 per cent on our most popular savings account, NetBank Saver.”
CBA has also introduced a five-month term deposit special of 2.20 per cent together with an additional 10bps bonus on this rate for existing CBA pensioner customers.
“We believe this combination of pricing changes delivers a fair balance of outcomes for both savers and borrowers,” Mr Sullivan said.
CBA’s changes will be effective from 23 July.
NAB has also reduced its variable mortgage rates by 19bps; however, its changes will apply across all of its home loan products.
NAB chief customer officer, consumer banking, Mike Baird also stated that the bank had considered impact of lower rates on its deposit customers.
“In making this decision, we have also considered our customers who rely on income from deposits, including farmers and growing numbers of retirees, as well as those wanting to build their savings,” he said.
Mr Baird revealed that NAB would not lower savings rates by more than 19bps for any subsequent reductions to the cash rate.
“Decisions like these are difficult and reflect the current unique circumstances, with home loan rates at record lows at the same time as deposit and savings rates also being at record lows,” he added.
He continued: “Getting the balance right is an ongoing challenge for banks, and with 9 million customers, making the right decisions for our customers matters for the Australian economy.”
Mr Baird also stated that the bank had assessed a range of factors, including funding costs, particularly for deposits, as well as competitive pressures in making these changes.
“The difference between what we charge and how much it costs us to fund a mortgage remains under pressure and while the circumstances of each RBA cash rate decision will vary and has some influence on the cost of borrowing money, it is not the only funding cost driver for NAB,” he said.
“At the same time, we are committed to investing in and improving our services and looking at ways to help our customers by remaining competitive on our rates.”
NAB’s changes will take effect on Friday, 12 July.
Westpac has said it will drop rates by 20 bps today for owner-occupier customers and a reduction of 30 bps for investor customers with interest-only repayments.
The following interest rate changes will come into effect on Tuesday, 16 July 2019:
- Variable home loan (owner-occupier) rate has been reduced by 20bps to 4.98 per cent p.a. for customers with principal and interest repayments
- Variable residential investment property loan reduced by 20bps to 5.53 per cent p.a. for customers with principal and interest repayments
- Variable home loan (owner-occupier) rate reduced by 20bps to 5.57 per cent p.a. for customers with interest-only repayments
- Variable residential investment property loan rate reduced by 30bps to 5.79 per cent p.a. for customers with interest-only repayments
“Today’s announcement means our Standard Variable Rate will be the lowest it has been in more than 45 years for owner-occupier home loan customers with principal and interest repayments,” David Lindberg, Westpac chief executive, consumer, said.
“The decision reflects the pressures of the declining cash rate in an historically low interest rate environment.
“It’s critical that we continue to carefully manage our business in a sustainable way for the longer term and take into account the diverse needs of all our stakeholders.”
Non-bank lender Resimac was the first to announce rate cuts, reducing variable rates across its Resimac Prime and Resimac Specialist home loan products by the full 25bps, effective from 24 July.
Resimac’s rate reductions will apply to both new and existing customers, with rates for new customers to start from 3.21 per cent (3.55 per cent comparison rate).
Commenting on the non-bank’s decision, Resimac CEO Scott McWilliam said: “In making this decision, we have considered both current internal and external factors but most importantly our customers, so today’s announcement brings great news for them.”
The non-bank is also currently reviewing rates across its other credit offerings, including its Accelerate, Ultra Plus and MoniPower products.
Non-bank lender State Custodians, which is funded by Resimac, has also informed its customers that it will be passing on the full 25bps cut, also effective from 24 July.
Athena Home Loans
Fintech lender Athena Home Loans has also passed on the full 25bps cut to both new and existing mortgage customers, effective immediately.
The lender’s owner-occupied home loan rates will now start from 3.09 per cent, with investment home loans starting from 3.49 per cent.
Athena CEO and co-founder Nathan Walsh noted the lender’s commitment to providing immediate rate relief for its home loan customers, and was critical of the major banks’ response to the RBA’s adjustment in June.
“The big banks delayed passing on the June RBA rate cut by as much as 21 days, costing Aussie borrowers over $100 million. Lenders who failed to pass on the full savings cost customers a further $280 million,” he said. “Australians are sick of these games.”
He added: “In contrast, Athena is committed to helping all customers pay off their home loan faster.
“We moved quickly to pass on the benefits to all our customers – passing on the full rate cut savings to all customers in minutes, not weeks.”
Non-bank lender Homestar Finance has cut its variable owner-occupied rates on its Star Essentials product by 25bps, from 3.24 per cent (3.27 per cent comparison rate) to 2.99 per cent (3.02 per cent comparison rate), effective immediately.
Queensland-based lender Auswide Bank has passed on the full 25bps cut to owner-occupied customers with its RBA Rate Tracker Home Loan product, with rates now starting from 3.49 per cent.
The lender has also reduced rates on its Low Rate Visa Credit Card product, with rate snow starting from 8.95 per cent.
Auswide’s managing director and CEO, Martin Barrett, commented: “These unique products provide both the customer and the bank with the certainty of a fixed margin over the RBA cash rate.”
The changes become effective within two working days after an RBA cash rate change.
[Related: RBA cuts cash rate to new record low]
Charbel Kadib is a journalist on the mortgages titles at Momentum Media.
Before joining the team in 2017, Charbel held roles with public relations agency Fifty Acres, and the Department of Communications and the Arts.
Charbel graduated from the University of Notre Dame Australia with a Bachelor of Arts (Politics & Journalism).