Citibank has reduced mortgage rates across its the home loan product suite, effective for new business from 26 August. The non-major lender is the latest in a spate of both majors and non-majors reducing their rates,in response to eased guidance from the banking regulator and all-time low cash rates set by the Reserve Bank.
The non-major lender is the latest in a spate of both majors and non-majors lowering their rates in reaction to the banking regulator’s eased guidance and the Reserve Bank’s all-time low cash rates.Citi’s variable owner-occupied P&I home loan rates will now start from 3.21% (3.26% comparison rate), while its fixed owner-occupied P&I rates will now start from 2.99% (4.61% comparison rate). Its investment loans with interest-only terms will now start from 3.74% (3.88% comparison rate).
Earlier, Westpac’s subsidiaries (the Bank of Melbourne, BankSA and St.George Bank) also reduced fixed rates across their owner-occupied and investment home loan offerings. The Bank of Melbourne and St.George slashed rates by between 10 bps and 1.35%, with both banks’ owner-occupied fixed rates now starting from 2.94% and investment fixed rates from 3.64%.
According to Canstar’s finance analyst, Steve Mickenbecker, the cuts have come in response to a decline in wholesale funding costs. “The fall in bond rates has reduced longer-term funding costs for lenders, and the Westpac subsidiaries have been able to pass this on to borrowers,” he said.
Also reflecting on the changes, RateCity research director Sally Tindall noted the shift in the mortgage market over the past few months and expects the wave of fixed-rate cuts to continue.“The idea of fixing your rate under 3 percent until August 2024 is a foreign concept to a lot of Australian mortgage-holders,” she said.
Consumer finance expert Lisa Montgomery advised, “When you are calling your lender you are going to be talking to their retention teams, and you need to be armed with information.” “It’s likely that you are paying too much. Regardless of whether you are an owner-occupier or investor, have a look at financial comparison websites”.
Lendi co-founder David Hyman said often customers got stuck on old rates and if they failed to pay attention they would ultimately be left paying too much.“When they initially took out the loan there may be some level of risk when the lender took on the customer,” he said. “But over four or five years, if they’ve paid their loan on time, whatever that issue was at the time doesn’t matter now, but the lender isn’t going to go typically out of their way to move a customer to the new rate that they qualify for.”
While these rates could be attractive to potential borrowers and refinancers, they must take note of the drawbacks of choosing a fixed-rate home loan. Most lenders impose limits on additional payments when the home loan is fixed. This, in turn, would extend the mortgage term and inflate the total interest paid overtime. Furthermore, some lenders do not offer redraw facilities on fixed-rate mortgages.
“It’s a question of what’s most important to you — always feeling like you’ve got the best rate, or just being able to plan out your repayments,” said Clint Howen, a broker at Hero.
Getting a fixed-rate home loan has its drawbacks aside from not being able to enjoy further rate cuts during the fixed-term period, borrowers might not also take advantage of other features like extra repayments.
“Whatever works for you is the best option. Some people just want peace of mind, but whatever the fixed rates are doing is an insight into what the banks think will happen. So they’re trying to offer you a good deal for a reason,” Howen said.
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