A big four bank announces rate cuts for homeowners, but there’s a catch

A big four bank will reduce interest rates by up to 0.25 per cent, but you’ll need to meet this strict criteria.

ANZ has slashed its fixed rate for owner-occupiers and investors by 0.25 per cent, but you’ll need to have a 20 per cent deposit or more to be eligible for the lower rate.

Canstar data insights director Sally Tindall said this strategic play from ANZ meant the bank now offered the lowest fixed rate out of the majors as competition in this space continued to push rates down.

The ANZ decision comes a week before the Reserve Bank board meets.

The RBA board will meet next week to consider changes to the official cash rate – which has been at 4.35 per cent since November last year. The announcement will be made at 2.30pm on Melbourne Cup day.

ANZ has become the cheapest of the big four banks for two- and three-year fixed rates at 5.74 per cent for eligible customers and Canstar research shows almost 30 lenders have cut at least one fixed rate in October.

The lowest fixed rate in the market is 4.99 per cent for a three-year term at SWSbank.

“While ANZ’s new lowest rate of 5.74 per cent isn’t likely to see people rush into a fixed rate, it could still be enough to encourage some borrowers to stop and do a health check on their mortgage.” Ms Tindall said.

ANZ becomes the lowest cost three-year mortgage out of the big four banks. Picture: NewsWire / Luis Enrique Ascui

The new rates won’t help 84 per cent of Aussies

While it is good news for some, these new rates won’t be available for the majority of homeowners trying to get into the market, and rates for those with less than a 20 per cent deposit will rise by 0.15 per cent.

Separate figures released by Mozo reveal 84 per cent of Australians saving for a home loan deposit cannot afford the 20 per cent needed in order to qualify for these rates.

Median property prices in Australia now stand at $973,300, requiring more than $194,660 for a 20 per cent home loan deposit.

In NSW, the median house price stands at $1,222,000, making a 20 per cent deposit $244,400.

The average NSW resident would need to save up to $244,000 to avoid lenders mortgage insurance. Picture: NewsWire / Nicholas Eagar

Without a 20 per cent deposit, homeowners are on the hook for lenders mortgage insurance (LMI), to be paid on top of the mortgage cost.

“The majority of first home buyers in Australia are now likely to face hefty LMI fees that add tens of thousands of dollars to the cost of a home loan – and that’s before you take into account the additional interest costs and other upfront costs including stamp duty and conveyancing fees,” Mozo’s personal finance expert Rachel Wastell said.

“Plus, unlike other insurance products that consumers can compare to get the best deal, LMI is chosen by the lender. This means borrowers have little choice but to pay the fee they’re given.”

Ms Tindall adds ANZ’s new pricing means there is a 0.45 percentage point premium for customers that cannot save up the 20 per cent deposit.

“Risk-based pricing is nothing new, but it’s interesting to see the bank lean into this strategy in a bid to attract safer borrowers onto its books at a time when property prices appear to be cooling,” she said.

Originally published as A big four bank announces rate cuts for homeowners, but there’s a catch