Australia’s big banks are battling for new customers with Westpac slashing variable mortgages rates ahead of an expected official rate cut tomorrow.
Westpac, Australia’s second biggest lender, has cuts its variable rates by 40 basis points to 6.44 per cent.
This means borrowers won’t see a 40 basis point hike after the two-year introductory period has expired.
Westpac made the move on Monday, ahead of the Reserve Bank of Australia’s expected interest rate cut announcement on Tuesday afternoon.
The Big Four banks are universally expecting the RBA to cut rates for the first time since November 2020, and are preemptively reducing both variable and fixed mortgage rates.
Canstar data insights director Sally Tindall said the big banks were fighting for new customers, with big rate cuts expected in 2025.
‘The mortgage wars are set to re-ignite on the back of a RBA rate cut,’ she said.
‘The big banks will almost certainly pass the first RBA cut on in full to their variable rate borrowers, however, we could see some lenders cutting new customer variable rates even further to capitalise on what could become a refinancing revival.’
Australia’s big banks are battling for new customers with Westpac slashing variable mortgages rates ahead of an expected official rate cut
ANZ offers the lowest variable rate of 6.09 per cent, making it cheaper than the Commonwealth Bank’s 6.15 per cent floating rate.
NAB offers a 6.44 per cent and Westpac does now, too, for all borrowers with a 20 per cent mortgage deposit.
Australia’s Big Four banks, however, all offer lower three-year fixed rates, hoping to lock in borrowers before the RBA embarks on more rate cuts this year to revive a slow economy.
ANZ has the lowest three-year fixed rate of 5.74 per cent, making it cheaper than NAB’s 5.84 per cent and the Commonwealth and Westpac on 5.89 per cent.
Westpac and the Commonwealth Bank are expecting the Reserve Bank of Australia to slash rates by 100 basis points in 2025.
This would take the RBA cash rate down to 3.35 per cent for the first time since March 2023, from the existing 4.35 per cent level.
The Big Four banks are universally the RBA to cut rates on Tuesday, following its two-day meeting.
The futures market regards a rate cut as a 90 per cent chance, with Australia’s headline inflation rate of 2.4 per cent well within the Reserve Bank’s 2 to 3 per cent target.
Westpac, Australia’s second biggest lender, has cuts its variable rates by 40 basis points to 6.44 per cent (pictured are Sydney pedestrians)
A borrower with an average, $600,000 mortgage is expected to see a $92 drop in their monthly mortgage repayment, following the RBA’s Tuesday afternoon rate cut.
Ms Tindall said many borrowers were likely to use their saving to pay down credit card debt.
‘Not all households will be in a position to save this extra money,’ she said.
‘For some, it will go straight on to problems that have been piling up in the background, such as unpaid bills and credit card debts.’
While variable rates generally fell in line with the RBA cash rate, some borrowers could still be forking out for the same monthly repayment.
Lower RBA rates mean a borrower can pay off more principal instead of just interest.
‘Variable rates should drop within the first couple of weeks of an RBA cut, however, borrowers should not assume their mortgage repayments will automatically drop with them,’ Ms Tindall said.
‘This is because some banks won’t lower a borrower’s monthly repayments when rates are cut unless the bank is explicitly asked to do so by the customer.’
Nonetheless, Ms Tindall said borrowers in good financial position could considering keeping the same repayment to pay off their mortgage sooner, and save on interest charges in coming years.
‘When your interest rate drops, but your monthly mortgage repayments stay the same, the money that previously was going to the bank in extra interest charges will go straight towards paying off your debt faster,’ she said.
‘It will help you build an additional buffer in your mortgage, and potentially save you thousands, even tens of thousands of dollars over the life of your loan.’
