Westpac slashes fixed home loan rates as property market booms

Westpac’s two-year fixed home loan rate is now the lowest on the market.

Westpac now has the lowest two-year fixed home loan rate on the market.

Westpac has come out swinging in the battle to attract more home loan customers as the property market bounds ahead, slashing its two-year fixed home loan rate to just 1.79 per cent and its three-year rate to 1.88 per cent.

Following the rate snip, the nation’s second largest bank is now offering the lowest two- and four-year fixed rates on the market, with its four-year rate sitting at 1.89 per cent, according to comparison website RateCity.

Westpac’s move to reduce its rates to all-time lows reflects the intense competition in the home loan market. The lender was the only one of the big four offering sub-2 per cent fixed rates across one and two-year terms even before the latest cuts.

“Westpac has thrown down the gauntlet to its competitors today proving there’s still heat in the fixed rate market,” RateCity research director Sally Tindall said.

Ms Tindell expects competition to continue heating up in the near term amid a strengthening property market.

“While we’re nearing the bottom of the rate cycle, provided the cash rate remains above zero, it’s likely there’ll be more cuts in the weeks to come as banks compete for the record levels of new lending coming through the door,” she said.

“Lenders are currently in a strong position to offer low fixed rates, which also have the benefit of locking a customer in for the fixed term.

Westpac’s move to offer the lowest two-year fixed rate, alongside the lowest four-year fixed rate, was an unusual position for a big four bank, she noted.

While Westpac is leading the pack, ANZ and NAB have also taken a knife to their rates in recent weeks. All eyes will now move to CBA, which is currently offering just one fixed rate — its four-year term — under 2 per cent.

Competition in the lending market has ramped up in recent weeks as the property market has roared back to life. So far, 44 lenders have cut home loan rates since the start of the calendar year, with 57 lenders now boasting home loan rates under 2 per cent, including three of the big four banks. But not everyone is following the downward trend, with 15 lenders hiking rates since the start of January.

The widespread rate cuts come as the nation is in the midst of another housing boom, with prices rising at the fastest pace in close to two decades.

Reserve Bank governor Philip Lowe, in the RBA’s ­latest monthly board meeting statement, noted the need for lending standards to remain high amid the rising market.

“Lending standards remain sound and it is important that they remain so in an environment of rising housing prices and low interest rates,” he said.

At its latest meeting earlier this month, the RBA held the cash rate steady at 0.1 per cent and reiterated the board’s view “highly supportive monetary conditions” would remain until 2024 at the earliest.