Westpac offers variable rate mortgages below 2 per cent, lifts fixed rates

In an aggressive move to help its troubled home loan business, Westpac has cut its variable rate on some mortgages to less than 2 per cent.

Westpac CEO Peter King. Picture: Jonathan Ng

Westpac has taken an aggressive position in its troubled mortgage business, lowering the standard variable rate for some products below two per cent.

The bank, however, has also lifted the price for some fixed-rate loans.

A note to mortgage brokers revealed the move to cut and hike interest rates in the key mortgage business, where Westpac has been losing market share as a result of loan processing problems offshore.

The problems led to Westpac announcing last July that it would move 1000 jobs back to Australia after Covid-19 restrictions offshore caused significant delays in processing times.

In a third quarter update last week, Westpac said growth in home lending now matched the average in the wider banking system.

Under the changes, to be unveiled on Tuesday, the introductory variable rate will be cut 20 basis points to 1.99 per cent for loans with a 70 per cent loan to valuation ratio, or a deposit of 30 per cent.

While the offer is for two years only, it’s understood to be the first time that one of the four major banks has slashed its variable rate to less than two per cent.

On the other side of the ledger, both four and five-year fixed rates will be hiked by 30 basis points.

Further changes will be announced by Westpac’s other brands, including St George Bank/Bank of Melbourne and BankSA.

Two-year fixed rates will be cut 21 basis points, with St George/Bank of Melbourne to have the lowest two-year rate of 1.79 per cent.

Four and five-year rates will be lifted by 30 basis points, and the basis variable rate will drop by 20 basis points.

The new rate for loans with a 60 per cent loan to valuation ratio will be 2.24 per cent.

Westpac, along with ANZ Bank, is fighting to get back into the home loan market after ceding market share to rivals Commonwealth Bank and National Australia Bank.

Both CBA and NAB have been exceeding industry rates of growth.

In last week’s update, Westpac chief executive Peter King said he expected the domestic economy to bounce back strongly from Covid lockdowns in two phases, as domestic restrictions eventually eased and international activity resumed due to higher local vaccination rates.

Originally published as Westpac offers variable rate mortgages below 2 per cent, lifts fixed rates