Shock as lenders slash rates to lowest level in 2 years off cycle

One Aussie bank has heaped pressure on the RBA to do in August what it failed to do at its last meeting.

The orange is how variable rates have tracked. Source: Canstar

Aussie homeowners are in for a treat as variable interest rates plunge to their lowest level in two years, a full two weeks ahead of the next Reserve Bank meeting.

The dramatic milestone came even before the Wednesday quarterly consumer price index release – data that will determine which way the RBA rolls come its monetary policy meeting on August 12.

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Lowest variable rates on Canstar.com.au

The Police Credit Union threw the cat among the pigeons by slashing variables to 4.99 per cent for owner-occupiers with a 20 per cent deposit – a significant milestone that hasn’t been hit since July 2023, according to Canstar research.

“The lowest variable rate is now a fraction above the lowest fixed rates in the market, despite the high possibility of further cash rate cuts from the RBA,” according to Canstar data insights director Sally Tindall.

Pressure is building for other providers to match that level out of the RBA cycle, with Horizon Bank and Pacific Mortgage Group offering rates of 5.24pc and 5.34pc respectively, while others like Homestar Finance, Australian Mutual Bank and RACQ are at 5.39pc.

“Variable home loan rates starting with a ‘4’ are finally back on the table after a two-year hiatus,” Ms Tindall said.

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Canstar data Insights director Sally Tindall.

“Police Credit Union might not be a big name brand, but with this move, it’s dialled up the competition in the variable mortgage market by at least a couple of notches.”

“The fact that the lowest variable rate is already below the 5 per cent barrier before an RBA cut, will put pressure on other low-cost lenders to drop rates below this mark.”

She said “banks are sharpening their pencils to attract new customers. For anyone still sitting on a rate well into the 6’s, it’s a wake‑up call to get on the phone to your bank.”

The rate cutting frenzy extended into fixed rates, which have tumbled in the past fortnight, with 13 lenders slashing at least one, including Australia’s fifth-largest lender Macquarie by up to 0.20 percentage points, while Greater Bank’s lowest 2- and 3-year fixed rates are at just 4.94pc.

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Lowest fixed rates on Canstar.com.au.

Canstar figures show 17 lenders now have at least one fixed rate under 5pc, but Ms Tindall warned those who were thinking about fixing now needed to “understand the trade‑offs – you might be buying peace of mind, but it could come at a cost if rates fall faster than expected”.

She said “fixed rates continue to tumble as banks jostle for pole position, but that doesn’t mean everyone should rush to lock in”.

“Banks are dangling sharp fixed rates in front of borrowers chasing short‑term certainty, but with RBA cash rate cuts still on the table, potentially as early as 12 August, fixing could be a gamble.”

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Originally published as Shock as lenders slash rates to lowest level in 2 years off cycle