CBA, NAB and Westpac slash interest on home loans to lowest in history after Reserve Bank cut

Three of Australia’s major banks have acted swiftly after the Reserve Bank slashed interest rates to a historic low on Tuesday.

Three of Australia’s major banks have slashed the interest on fixed home loans, with some lending products now attracting a rate of less than 2 per cent.

Commonwealth Bank, Westpac and NAB have taken a knife to lending rates following the Reserve Bank’s decision on Tuesday to cut the cash rate to 10 basis points to better support the Australian economy out of the COVID-19-induced recession.

In a statement on Wednesday morning, CBA said its owner-occupier four-year fixed rate would be reduced by 100 basis points to 1.99 per cent – the lowest fixed rate the bank has ever offered in its 108-year history.

Westpac has also moved its four-year fixed owner-occupier rate to 1.99 per cent.

NAB on Wednesday afternoon said its four-year fixed owner-occupier rate would move to 1.98 per cent, the lowest rate the financial institution has ever offered.

The country’s largest retail bank is the first out the big four to take a knife to lending rates. Picture: NCA NewsWire/Bianca De Marchi

The major bank has also lowered two and three-year fixed rates for owner-occupier home loans by 15 basis points, both offering rates at 2.14 per cent. One-year fixed rates are being advertised at 2.19 per cent.

Westpac has changed one, two and three-year fixed rates to 2.09 per cent, while NAB’s one to three-year fixed rates have moved between 2.09 and 2.19 per cent.

CBA, Westpac and NAB have not made changes to the interest setting on variable home loan rates.

It is understood ANZ has not yet announced rate changes following the RBA move.

CBA head of retail banking Angus Sullivan said the decision to move on fixed rates first was to provide customers with certainty that they could lock in a low interest yield for a number of years.

CBA head of retail banking Angus Sullivan said the decision to move on fixed rates first is to provide customers with certainty. Picture: Chris Pavlich

“Yesterday’s move by the RBA will lower the structure of interest rates and provide confidence that Australians can borrow over the long term at historically low rates,” Mr Sullivan said.

“We have reflected this in our interest rate settings, offering customers our lowest ever fixed rate – 1.99 per cent fixed for four years – providing customers who fix some or all of their home loan with certainty and confidence into the future.”

NAB personal banking executive Rachel Slade said it's the sixth cash rate reduction in the past 18 months.

“With interest rates at record lows we are doing what we can to support homebuyers and business owners through COVID-19, while also balancing the impact on our deposit and savings customers,” she said.

CBA has also reduced the interest on business loans through the federal government’s COVID-19 small business loan guarantee scheme by 51 basis points.

Westpac has lowered fixed rates. Photo by William WEST / AFP

A secured loan under the scheme now attracts a rate of 2.99 per cent, while an unsecured loan garners a rate of 3.99 per cent.

The bank’s BetterBusiness loans have been cut by 50 basis points with rates as low as 2.49 per cent.

Westpac chief executive of business banking, Guil Lima, said small businesses being able to access cheap debt would be vital in supporting the economic recovery.

“We have made significant reductions to some small business loans to support lending and growth, as part of our ongoing efforts to assist small businesses during the pandemic,” Mr Lima said.

Fixed rates for small business loans at Westpac are now 2.38 per cent, while secured variable rates are as low as 3.09 per cent.