Westpac cuts variable mortgage rate to lowest of big four banks

Westpac has slashed its variable home loan interest rate to what is now the lowest on offer by a major bank, but not for everyone.

Westpac is courting well-positioned borrowers with attractive variable mortgage rates. Picture: AAP

Westpac has slashed its variable home loan rate from 2.93 per cent to 2.69 per cent, the lowest on offer by a major bank.

The nation’s second-largest retail bank has cut its variable rate by 24 basis points. However, the advertised rate is only available to new customers with a loan-to-value ratio of 70 per cent.

RateCity research director Sally Tindall said Westpac was attempting to attract customers that had a decent amount of capital ready to put into a home loan. “We are seeing this more and more, where banks are throwing rock bottom rates at people who have a decent amount of equity up their sleeve,” Ms Tindall said.

“The bank is looking for ideal borrowers to have a nice buffer that can protect its home loan book.”

According to RateCity, a $500,000 mortgage paying principal and interest for 30 years would save $766 annually from Westpac’s rate change.

Westpac is offering a variable rate of 2.79 per cent to customers with a LVR greater than 70 per cent. Subsidiaries St George and Bank of Melbourne are advertising variable rates to new home loan customers at 2.59 per cent, if an LVR ratio of 60 per cent is held.

Westpac said Friday’s rate reductions were to ensure its lending products remained a competitive proposition for borrowers.

“While there is still some uncertainty in the market, the historically low interest rate environment means borrowers can access record low interest rates for home finance, as well as a range of services and benefits,” a spokeswoman said.

Australian Prudential Regulatory Authority banking statistics for the month of April show Westpac’s home loan book slipped by 0.64 per cent compared to April last year.

“Westpac Group’s home loan book has fallen year on year. They need new customers to keep moving in the right direction,” Ms Tindall said.

According to APRA data, Macquarie Bank has experienced the largest year-on-year growth, with its home loan book increasing by 33.03 per cent.

RateCity noted there had been a lot of movement in variable rates across the sector, while trimmings to fixed rates seemed to be cooling off.

Australian banks have been forced to make interest rate carvings on loans and deposits, following the Reserve Bank’s decision in March to cut the official cash rate, in an attempt to ease economic pressures caused by the coronavirus pandemic.

ANZ has the second-lowest variable rate out of the big four, at 2.72 per cent, while Commonwealth Bank is advertising a variable rate of 2.79 per cent. NAB’s lowest variable rate on offer is 2.84 per cent.

Westpac also has the lowest two-year fixed rate out of the large incumbents, at 2.19 per cent.