‘Mortgage war alive’: Commonwealth Bank slashes interest rates ahead of next RBA meeting

A big four bank has dropped its mortgage rates, as competition for homeowners heats up.

Australia’s largest mortgage lender, CBA, has become the latest big four bank to slash its mortgage rates, but there’s a catch for homeowners.

Wednesday’s move by CBA will see it lower its owner-occupier, principle and interest variable rate loans to 5.84 per cent, in line with Westpac and ANZ.

The new home loan rate comes with a few caveats, including it being a digital-only home loan, a 40 per cent deposit and it will only apply to new customers, with existing mortgage holders missing out unless they refinance.

Major banks are slashing rates on increasing competition. Picture: NewsWire

Despite the cheaper rates only applying to new customers, Canstar data insights director Sally Tindall described the new rates as “fantastic” news for mortgage holders.

“This move is fantastic for competition because when Australia’s biggest bank cuts its home loan rates it forces other lenders to sit up and take stock of their own,” she said.

“While this new lowest rate from CBA of 5.84 per cent is only for new customers with a 40 per cent deposit, it does not stop existing CBA customers from using this offer as a bargaining chip for their own rate negotiations.”

According to Canstar, Wednesday’s move from CBA, puts the bank neck-and-neck with Westpac and ANZ, with their lowest variable rates coming in at 5.84 per cent.

All three rates are only available for customers applying online, however, CBA is the only one offering this rate to new lending, in addition to refinancers.

CBA and ANZ’s loans can include an offset account for $10 a month, while Westpac’s does not.

CBA’s subsidiary, Unloan, offers a lowest rate of 5.74 per cent, while NAB’s subsidiary ubank offers a lowest variable rate of 5.84 per cent.

“As it stands, there are more than 35 lenders on the Canstar database offering at least one variable home loan rate under 5.75 per cent,” Ms Tindall said.

Mortgage holders are being urged to use the rate cuts as a negotiating tool on their home loans. Picture: NewsWire / Nicholas Eagar

Ms Tindall said despite rates currently falling, mortgage holders should wait until after the Reserve Bank of Australia’s next meeting for more savings.

The RBA is widely predicted to cut interest rates in May by 25 basis points, although NAB bank has called for a 50 basis point rate reduction.

“With the prospect of further cash rate cuts still firmly on the cards, potentially as soon as 20 May, variable rates could go well under 5.50 per cent in a matter of weeks,” Ms Tindall said.

The move from CBA follows an announcement earlier, this week, added a new mortgage option for customers – its Simple Home Loan, which comes with the option of up to two offset accounts.

This new loan is currently available to customers who apply directly to the bank, however, the bank is planning to extend this option to third party brokers shortly. Brokers do not have access to CBA’s lowest rate loan, the Digi Home Loan.