CBA drops fixed and variable mortgage interest rates

Commonwealth Bank’s decision to cut its fixed and some variable mortgage interest rates is good news for borrowers, and the move might herald a fresh race from lenders to go lower.

Commonwealth Bank on Friday announced it would reduce some new customer variable rates by up to 0.35 percentage points, and fixed rates by up to 0.7 percentage points. Picture: AAP

Variable home loan interest rates have started following fixed rates lower, led by the nation’s biggest bank.

Commonwealth Bank on Friday announced it would reduce some new customer variable rates by up to 0.35 percentage points, and fixed rates by up to 0.7 percentage points, following a flurry of fixed-rate cuts by other banks in recent weeks.

The bank did not change its standard variable rate, but the move might herald a fresh race lower for lenders ahead of an expected Reserve Bank rate cut in 2025.

CommBank cut its basic home loan rate from 6.59 per cent to 6.44 per cent, and reduced its package home loan rate from 6.49 per cent to 6.34 per cent.

Canstar director of data insights Sally Tindall said the move “will put heat on the rest of the market to make sure they’ve got competitive new customer home loan rates”.

“While these variable rate changes are only for new customers, there’s nothing stopping existing CBA variable mortgage customers from picking up the phone and asking for this rate cut,” Ms Tindall said.

“The fixed rate tide is continuing to turn as the cost of wholesale funding continues to drop. Over the last fortnight, a total of seven lenders have cut at least one fixed rate.

“Despite this, most borrowers are opting to stay on a variable rate in anticipation of RBA rate cuts next year.”

CommBank’s new cuts bring it closer to its peers, but there are lower rates in the mortgage market, ranging from 5.49 to 5.79 per cent across variable and fixed terms, according to Canstar.

Canstar director of data insights Sally Tindall. Picture: Tim Hunter.

Mortgage Choice Berwick owner David Thurmond said the flurry of rate cuts was “welcome news” and more were likely in the coming months.

“Every time we see banks lowering interest rates it’s a good time for borrowers … it’s more justification for people to review their current rates,” he said.

“The major lenders have kept their power dry over the last 12 months, the discounts dried up and rates have been quite high.”

Mr Thurmond said he expected lenders to become more competitive and “be more aggressive in trying to win your business”.

Central banks overseas are cutting their official interest rates well before the RBA, and the US Federal Reserve is tipped to move lower in September. Most mortgage experts say now is not the time to lock in a fixed rate because lower rates are likely in the future.

“Personally I would be waiting and seeing,” Mr Thurmond said.

“If the expectation is that rates will come down from the Reserve Bank, I would want to wait and see what happens, because you don’t want to lock in a rate that turns out to be high in 12 months.”

A CommBank spokesman said the new rate cuts, effective immediately, were “part of our ongoing review of our interest rates and market conditions”.

“We help more Australians find a home than any other lender,” he said.

Ms Tindall said three of the big four banks had cut at least one fixed rate in the last month, with only ANZ holding out.

“However, if history is anything to go by, ANZ is likely to sharpen its fixed rate offering,” she said.

“The Canstar database shows the majority lenders’ lowest rates are now fixed ones, but in most cases it’s not by much. A couple of RBA cuts could see many banks’ lowest rates swing back to variable, potentially leaving those borrowers on a fixed rate high and dry on an uncompetitive rate.

“While it’s unclear just how far fixed rates will fall at this stage, it’s highly likely they’ve still got a way to go.

“We expect to see more fixed rate cuts in the weeks and months ahead, as central banks across the globe cut official rates and wholesale funding pressures hopefully continue to ease.”

Ms Tindall said the last time a major bank cut variable rates was NAB back in April this year.

CBA has now matched Westpac on its most competitive rate - 5.89 per cent for a three-year term, and Canstar has 13 lenders offering below that on its database.

Originally published as CBA drops fixed and variable mortgage interest rates