Westpac drops variable rates as competition for refinancing heats up

A major bank has reduced its variable rates, as experts predict a ‘rates war’ between the big four lenders is about to heat up.

Australia’s second largest lender has announced it’s dropping its variable rate home loans by up to 35 basis points, as the mortgage war between lenders heats up.

Westpac will now offer new customers a variable rate home loan rate of 5.84 per cent, equalling the lowest variable rate among the big four banks.

But there’s a catch, with customers having to apply online and have a 30 per cent deposit in order to get the lowest variable rate.

Competition among the big four banks is heating up Picture: Newswire

Canstar data insights director Sally Tindall said banks are starting a “refinance war” as they look to attract new customers.

“This is great news for people with a home loan,” she said.

“However, the rock bottom rates are reserved for new customers with decent sized deposits so they will need to switch lenders or at least haggle if they want to be a winner in the refinance war.”

The latest ABS data shows more than $206bn worth of loans were refinanced in 2024, despite the official cash rate not moving from 4.35 per cent.

But Canstar predicts refinancing could pick back up following the RBA’s February cut, with the central bank reducing the official cash rate to 4.10 per cent.

Westpac has equalled the lowest variable rate on the market. Picture: NewsWire / Simon Bullard.

Ms Tindall said Westpac going head-to-head with ANZ is a big win for customers.

“For months ANZ has had the lowest variable rate among the big four banks with its digital-only home loan, closely followed by CBA. This move sees Westpac leapfrog CBA and leave NAB in the wind,” Ms Tindall.

“Three of the big four banks are now in a digital arms race, jostling to steal customers from each other but only those customers willing to apply digitally.”

But Ms Tindall said Australian homeowners could get a better rate with providers outside of the big four banks.

According to Canstar, even with these new rates, there are over 35 lenders offering at least one variable rate under 5.75 per cent, with the lowest advertised rate.

Pacific Mortgage Group, People’s Choice, RACQ Bank, The Capricornian and Australian Mutual Bank currently tie for the lowest advertised price for refinances at 5.64 per cent.

Originally published as Westpac drops variable rates as competition for refinancing heats up