The big four major banks joined together challenging the request from Treasurer Josh Frydenberg to pass on the complete 0.25 percentage rate cut from the RBA to homeowners. ANZ said it would cut its most common home standard variable rate (SVR) loans by 0.14 percentage points twenty-four hours after the RBA moves, With a 0.15% cut, Westpac was marginally more generous.
Westpac’s choice is side by side with NAB, while ANZ’s nudges between the couple and the CBA’s 0.13% cut. ANZ also aligned with CBA and NAB passing a significantly bigger cut (complete 0.25%) to investors with SVR interest-only loans from. Westpac shied away from that generosity, offering investors the same cut as their owners.
Treasurer Josh Frydenberg said the big four’s decision not to pass on the cut in full was disappointing.“The Reserve Bank itself has pointed to the lower borrowing costs for the banks and their expectation that these interest rate cuts are passed on,” Mr. Frydenberg told yesterday.
“It’s not just the Government that they are going against here, they are also going against the advice of the Reserve Bank. “The banks have a lot of explaining to do. People should shop around, get the best deal and make their displeasure known to their banks.” RBA Governor Philip Lowe said in an address at the RBA board dinner that the cuts were aimed at achieving economic targets which had slowed in recent months.
“We are seeking to make more assured progress towards both full employment and the inflation target,” Mr. Lowe said.“Today’s decision, together with our decisions in June and July, will assist on each of these fronts.“In doing so, these decisions will promote the collective economic welfare of the Australian people, which we need to remember is the ultimate goal of monetary policy.”
So, if you’re a customer of the big banks, it might be time to consider switching banks to get a better rate. There are independent lenders with rates under 3 percent per annum. The cash ratio of the Reserve Bank is now at an all-time low, causing a variety of home loans to break the interest rate limit of 3 percent. Over June and July, the RBA cut a total of 50 basis points to have Australia’s cash rate now sitting at an amazing 1%.
While none of the big banks have passed on the entire cut to consumers, comparison site InfoChoice now lists 22 three-year fixed rate products from independent lenders with rates under 3 percent per annum. And there are 4 four-year fixed-rate home loans for owner-occupiers with rates under 3 percent.”It is amazing to think that a young couple buying their first home can lock in these extraordinarily low rates for up to four years, until mid-2023,” said InfoChoice chief Vadim Taube.”And for anyone with a home loan around 4 or 5 percent, the incentives to compare and refinance to a cheaper rate are now all but irresistible.”
The lowest rates listed on InfoChoice in each category are (comparison rate based on $150,000 loan over 25 years):
• Variable-rate: 2.89% (comparison rate 2.89%) from Reduce Home Loan’s Low Rider Variable loan.
• 12-month fixed-rate: 2.79% (comparison 4.17%) from Greater Bank’s 12-month Fixed Home Loan.
• 3-year fixed: 2.79% (comparison 3.04%) from Reduce Home Loans Home Owners Dream 3 Year Fixed
• 4-year fixed: 2.94% (comparison 3.76%) from St George Bank and Bank of Melbourne’s Owner Occupier P&I with Advantage Package (LVR<60%)
Most Australian home loan borrowers are resisting fixed rates and are staying with variable rates, according to Taube. “So Aussies are listening to the governor of the Reserve Bank and they expect rates to stay low or go even lower.”
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