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Multiple lenders announced rate changes yesterday, adding to competition in the mortgage market. However, the savings are still limited to new borrowers.
As of today, Bank of Queensland and Virgin Money have cut the two-year fixed rate special for owner occupiers paying P&I to 3.44% and the three-year to 3.39% for new borrowings of $150,000 for BOQ home loans and $300,000 for Virgin.
However, the most dramatic cut came from Greater Bank, which will become the first lender to offer a mortgage at less than 3%, from Monday June 3.
A rate of 2.99% will apply to the bank’s one year fixed-rate home loan for owner occupiers, valid on all new loans of $150,000 or greater.
“Lenders are getting ahead of the Reserve Bank, aggressively using fixed rate cuts to grow business, [but these] don’t alleviate any repayment pressures for existing borrowers as the changes only affect new customers,” explained Steve Mickenbecker, Canstar group executive of financial services.
The margin from the lowering wholesale funding costs for lenders has so far been exclusively allocated towards luring in new borrowers and expanding market share.
“An RBA cut should give existing variable rate borrowers an opportunity to catch up part of the distance they have fallen off the pace,” said Mickenbecker.
According to financial analyst Martin North, “The Reserve Bank is putting heavy pressure on [the majors] behind the scenes to get their assurance that if they did cut rates, the banks would actually pass them on.”
Further, North said that the big banks are being strongly encouraged to “put more money into the pocket of consumers” through cutting rates for existing customers in addition to unrolling attractive rates for new borrowers.
Whether or not banks choose to lower rates for all borrowers remains to be seen until after Tuesday’s possible cash rate cut.
