Federal Budget 2020: Big 4 bank mortgages could drop under 2% if RBA cuts, says RateCity

Big four bank mortgages could go below 2 per cent if the RBA cuts the cash rate on Tuesday, RateCity says.

Even the big four banks could drop some mortgage rates below 2 per cent if the RBA lowers the official cash rate on Tuesday, RateCity says.

Home loan rates have continued to decrease throughout the COVID-19 pandemic despite the last cut to the official cash rate occurring six months ago, with the big four banks likely to go below 2 per cent if the RBA slashes the cash rate on Tuesday, according to RateCity.

Research from the consumer finance website shows that although the RBA’s cash rate has remained at 0.25 per cent since April, rates for variable and fixed mortgages have fallen to new lows in the past few weeks.

RateCity research director Sally Tindall said that if the cash rate was cut, the home loan rates of the big four were likely to fall below 2 per cent.

“There are 12 lenders now offering home loans below 2 per cent, and the list is growing by the week,” she said.

“With a possible rate cut waiting in the wings, we could even see a big four bank break the 2 per cent barrier over the next few months.”

In April the lowest variable rate across all lenders was 2.39 per cent. In September it was 1.89 per cent – a decline of 50 basis points.

The lowest rate for a two-year fixed rate mortgage in April was 2.09 per cent; now, it’s 1.99 per cent.

The big four banks - which have ownership of three quarters of Australia’s mortgage market - have dropped their lowest variable rates by an average of 25 basis points in the past six months, although the lowest rates are typically reserved for new customers.

Ms Tindall told The Australian that an ultimate decision on a rate cut was likely to be postponed until after the budget was handed down.

“It could come as early as tomorrow for the simple fact that the budget is tomorrow and there are stimulatory measures in the budget – any added cut is likely to give the economy an extra boost,” she said.

“But I think they’ll want to see how people react to the budget, to see the changes to JobKeeper and JobSeeker and see the impacts they have on households before they make that last cash rate cut.”

Ms Tindall said any RBA rate cut would likely be a “microcut” of 15 basis points, combined with further bond-buying.

“They are focused to make sure the banks have cheap funding to help provide cheap access to credit so you’ll probably see more in the way of term funding facilities.”