Major bank continues to lower rates as competition heats up

Competition among mortgage providers has spurred a big four bank to cut its variable interest rates ahead of tomorrow’s RBA decision on the cash rate.

Australia’s second largest home loan lender has tweaked its variable rates just days after announcing an update to fixed rates, as the Reserve Bank of Australia contemplates if it will lower the cash rate on Tuesday.

Fresh figures from Canstar show Australia’s second largest home lender Westpac has lowered its variable rates in a sign the banks are preparing for stiffer competition.

Westpac has changed its variable loan terms, with its best offer coming in at 6.44 per cent for the first two years before going up by 40 basis points to 6.84 per cent.

But it has now removed the 0.40 per cent increase after two years to make its variable home loan more attractive for homeowners.

The big four banks are moving on interest rates, as competition heats up in the space. Picture: Newswire

Canstar data insights director, Sally Tindall said the mortgage wars are set to reignite on the back of a RBA rate cut.

“The big banks will almost certainly pass the first RBA cut in full to their variable rate borrowers, however, we could see some lenders cutting new customer variable rates even further to capitalise on what could become a refinancing revival,” she said.

“Borrowers across the country will be laser-focused on what their new variable mortgage rate will be, and ideally take the time to check what other lenders are offering.

This change comes on the back of rate cuts from the other big banks last year, which included cuts to new customer variable rates from CBA, NAB and ANZ.

While the banks have been quietly offering more competitive rates for new customers, Canstar warns these are not being applied to existing customers, who need to ring up their banks to get a better rate.

Westpac has now slashed rates on both its fixed and variable home loans. Picture: NewsWire / Simon Bullard.

According to Canstar, ANZ continues to have the lowest advertised variable rate out of the big four banks at 6.09 per cent, however, this rate is only available to refinancers who apply digitally via the ANZ Plus app.

The major banks are starting to cut rates ahead of the RBA’s meeting from February 17 to 18, where the central bank is widely predicted to reduce interest rates by 25 basis points from 4.35 per cent to 4.10 per cent.

This comes as Australia’s trimmed mean inflation rate came in at 3.2 per cent for the December quarter, undershooting the RBA’s expectations of 3.4 per cent.

The bank made headlines last week after adjusting its fixed options.

Under its new pricing, Westpac has cut fixed rates for owner-occupiers by 0.40 percentage points, while investors will see a 0.35 percentage points reduction in their payments.

With this move, Westpac now has the lowest of the big four banks, with fixed-term rates starting out at 5.59 per cent for an owner-occupiers paying principal and interest with a deposit of at least 30 per cent on a two-year term.

NAB was the first of the big four banks to drop its interest rates two weeks ago.

According to Canstar, the cuts for owner-occupier fixed rates were up to 0.25 percentage points, while the cuts for investor fixed loans were up to 0.30 percentage points.

NAB’s lowest fixed rate is now 5.84 per cent, available for owner-occupiers paying principal and interest with a deposit of at least 20 per cent on a three-year term.

Westpac shares are trading down more than 5 per cent to $32.79 at the time of writing as it announced its quarterly results ending 31 December.

The falls come after announcing a 9 per cent drop in net profits in the first quarter, although the bank is still profiting $1.7bn for the first three months of the financial year.

Originally published as Major bank continues to lower rates as competition heats up