Several Australian lenders have cut home loan rates in recent weeks, even though the Reserve Bank of Australia (RBA) ultimately held the cash rate steady, offering opportunities for refinancers to secure better deals.
According to Compare the Market economic director David Koch (pictured), some of the country’s largest lenders have reduced their rates, continuing a broader trend of mortgage rate cuts.
The Commonwealth Bank of Australia (CBA) recently reduced both its fixed and variable mortgage rates, with the three-year fixed rate falling from 6.59% to 5.89%. Similarly, Westpac has matched CBA’s offering on its fixed loans with a 5.89% rate for loans with less than 70% loan-to-value ratio (LVR).
Here are some of the notable reductions:
|
Lender |
Rate type |
New rate |
Reduction |
|---|---|---|---|
|
Commonwealth Bank |
3-year fixed with wealth package |
5.89% |
-0.70% |
|
Westpac |
2-year fixed <70% LVR |
5.89% |
-0.80% |
|
3-year fixed ≤80% |
5.79% |
-0.05% |
|
|
St. George |
5-year fixed 70%-80% LVR |
6.19% |
-0.75% |
|
Macquarie |
2-year fixed <70% LVR |
5.59% |
-0.30% |
Despite these cuts, Koch cautioned borrowers about locking in rates now, especially if the RBA lowers the cash rate later in the year.
“Fixed home loans are great for shielding you from rate rises, but they will block you from taking advantage of a rate cut,” Koch explained. He added that, historically, it’s often better to remain on a variable rate when rates are at their peak and expected to fall.
Compare the Market’s analysis revealed that a 1.2% difference in the lowest advertised variable rates could result in significant savings. A borrower with a $750,000 mortgage could save up to $595 in monthly repayments by refinancing from a 7.24% rate to a 6.04% rate.
|
Loan size |
6.04% monthly repayment |
7.24% monthly repayment |
Monthly savings |
|
$500,000 |
$3,011 |
$3,408 |
$397 |
|
$600,000 |
$3,613 |
$4,089 |
$476 |
|
$750,000 |
$4,516 |
$5,111 |
$595 |
|
$1,000,000 |
$6,021 |
$6,815 |
$794 |
|
Note: Monthly repayments do not include any reduction in the mortgage balance over time. These calculations assume: An owner-occupied variable interest rate of 6.04% compared to 7.24% p.a; principal and interest (P&I) repayments; the loan term is 30 years; and there are no monthly fees. Source: Compare the Market |
|||
Koch also stressed the importance of shopping around for the best deal, as some lenders are still offering cashback incentives to refinancers. The number of lenders offering $2,000 cashback has dropped from 35 in March 2023 to just five. Among these, ME Bank offers the largest cashback at $3,000, alongside its competitive 6.13% rate.
“Be careful not to fall into a honey trap,” Koch noted. “Make sure the cashback deal is attached to a low rate, or it may not be worth it.”
What are your thoughts about the recently unveiled rates? Share your comments below.
