Lenders reduce rates on top of RBA rate cut
Many mortgage holders could save thousands more, with several lenders slashing rates further than the official cut.
As widely expected, the Reserve Bank cut the cash rate by 0.15% in November. But many mortgage holders don't realise they could save thousands more, with several lenders slashing rates further than the official cut.
Even before the RBA announced a cash rate reduction of 0.15%, bringing the official cash rate to the record low of 0.10%, a number of lenders had announced plans to give both existing and new customers access to even cheaper mortgages.
These reductions give borrowers an even greater opportunity to save thousands of dollars on their home loans, with a range of both fixed and variable products on offer.
Here are some of the biggest cuts from the last few weeks:
Matching the cash rate reduction
Two weeks ahead of the RBA's cash rate decision, homeloans.com.au independently reduced their Low Rate Home Loan variable interest rates by 0.15% for all new and existing customers with 20% equity/deposit or more on a principal and interest loan.
"Following the RBA cash reduction, we decided to reduce variable rates by another 0.15% for all new and existing variable rate customers as well – and both of these reductions also apply to those who are in the process of completing their application with us," said Scott McWilliam, CEO of homeloans.com.au.
"This means most of our customers will enjoy a reduction of 0.30% to their home loan interest rate since taking out their loan only a few short weeks ago."
Importantly for landlords, the lender's earlier 0.15% rate reduction applies to investment loans as well as owner-occupier loans, provided they're on a principal and interest loan with 20% equity or more.
"The additional 0.15% rate reduction announced following the RBA cash rate reduction applies to all variable rate loans: investors as well as owner-occupiers, and those on either principal and interest or interest only repayments," McWilliam said.
The online lender also caters to a range of borrower types, "including those with a deposit as little as 5% of the property price, which can be gifted and can include non-genuine savings", he added.
"Our low-deposit option is particularly popular with first home buyers who need a bit of extra help entering the property market. Within the parameters of our responsible lending obligations, we will actively work with borrowers to understand their situation and find a product to suit their needs," McWilliam said.
Massive loan decrease of 1%
Commonwealth Bank announced its lowest ever fixed rate for residential home loan customers, dropping its four-year fixed rate loan by 100 basis points – down from 2.99% to 1.99%.
On a $600,000 loan, this reduction represents an interest saving of a sizeable $6,000 per year, and would see your monthly repayment drop from $2,520 to $2,215.
Angus Sullivan, CBA group executive retail banking services said he hopes the bank's aggressive reduction will "provide confidence that Australians can borrow over the long term at historically low rates".
The Big 4 bank also passed on the full cash rate reduction on two and three year fixed home loan terms, for owner occupiers paying principal and interest in the Wealth Package; this 15 basis points reduction brings the rate down to 2.14% p.a.
The bank passed on a 0.10% reduction on its one-year fixed rate home loan for new customers (owner occupiers only, paying principal and interest in the Wealth Package), bringing the rate down to 2.19% p.a.
Industry-low interest rate
Homestar Finance has lowered its ongoing variable home loan rate to 1.79%, making it the absolute lowest residential loan interest rate on offer in Australia.
However, it comes with a slight catch – it's only available to:
- New customers
- Those who wish to refinance (not property buyers)
- Borrowers with a loan-to-value ratio of 60% or less
- Principal and interest loans only
- For amounts of up to $850,000.
If your finance requirements fit within these criteria, then you could stand to save a huge amount with this type of deal. On a $600,000 mortgage, for instance, if you refinance from 3.0% to 1.79%, your interest savings alone would be $7,260 per year.
A number of other banks and lenders already had extremely competitive rates in the market, and many of them moved swiftly to pass on this recent rate cut to customers.
One such lender was Athena, which passed on the 0.15% rate cut in full within moments of the RBA's announcement.
"Athena passed on the RBA cut in full and instantly to all customers, new and existing, as our mission is to help Aussies pay off their home loan faster, and this is an opportunity to help our customers unlock big savings," said Nathan Walsh, CEO and co-founder of Athena, adding that as a digital bank, Athena has the flexibility and agility to respond quickly to market influences.
"Not one of the top 12 lenders passed on the RBA rate cuts in full and instantly to all customers and the cost of this to everyday families is staggering," he said.
"Many borrowers end up paying thousands in excess interest costs. You shouldn't put up with it – now is the time to switch and save."