Banks are ramping up competition to win over homebuyers as RBA looks increasingly likely to cut the cash rate target. Picture: Max Mason-Hubers
Eight more banks have slashed interest rates, with three big guns firing off cuts Thursday morning – the biggest of which is double what RBA is expected to deliver in a matter of weeks.
Comparison firm Canstar’s tracking showed eight banks had moved on fixed rates for new customers in the past three days, three of whom also dropped their variable rate offerings.
The escalation brings to 18 the number of banks that have cut at least one fixed home loan rate in the past month, including big bank NAB on April 11.
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On Thursday morning alone three major lenders made their moves, including Bank Australia with a 20 bps cut to give it the lowest fixed rate in the Canstar database of 4.94 per cent for a three-year term. That deal is exclusively for the Clean Energy Home Loan which is limited to customers buying or building a qualifying green home.
The Canstar database is now showing Macquarie Bank – which also cut by 20 basis points Thursday morning – reclaiming the lowest fixed rate in the general market for new customers at 5.19 per cent for two and three-year fixed terms.
But it was Aussie Home Loans which delivered the biggest cut so far, throwing in a 50 bps slash Thursday.
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Macquarie Bank. has moved to stake a claim on the lowest fixed rate on the market for general home loans. Picture: Britta Campion / The Australian
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Canstar data insights director Sally Tindall expected more lenders to follow suit before the Reserve Bank board meets on May 20 – especially across the fixed market where the biggest reductions have come ahead of rate cut expectations.
“We tend to see fixed rate changes ramp up in the lead up to an RBA meeting where there’s a high expectation of a change,” Ms Tindall said. “The possibility of another cash rate cut in May is very much on the cards.”
“I don’t see them cutting by 50 basis points though,” Ms Tindall said of the RBA. “To double would spread too much alarm and probably send the wrong message.”
Five lenders that put in cuts on Tuesday and Wednesday. They were joined by Macquarie, Aussie Home Loans and Bank Australia on Thursday. Source: Canstar
Banks are clearly ignoring that, with Regional Australia Bank on Wednesday putting in cuts of up to 45 bps on fixed rates for new customers (close to a double rate cut), though it did also play both sides via a minor increase to another fixed product by up to 2 bps.
On Tuesday, AMP cut variable rates for new customers by up to 20 basis points, then dropped its fixed rates even further by up to 30 bps.
A day later Summerland Bank cut its variable for new customers (by up to 10 bps) and then went one better for its fixed rate with a fall of up to 40 bps.
Defence Bank is also singing from the same songsheet with its variable rate reduced by up to 20 bps and fixed going further with cuts of up to 30 bps.
Hume Bank did not bother with variable at all, going straight to the fixed rate jugular with cuts of up to 34 bps.
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Canstar Data Insights director Sally Tindall. Picture: supplied. NSW real estate
Like RAB’s minor upwards tweak, four other lenders put in “tiny” increases of up to 5 bps though it was on variable rates for new customers – Bendigo Bank, Adelaide Bank, Timely Home Loans and Qantas Money Home Loans.
Ms Tindall said those lenders could have already hit quotas or simply be “taking their toe out of the fire” of the lowest rate lending war.
“They’re just drawing back a little bit out of that competition, which is not very far. I mean, with Timely it’s at 5.79pc, that’s pretty competitive.”
The figures were based on rates at 10am Thursday for owner occupier and investment loans for $600,000, with 80 per cent LVR and principal & interest and/or interest-only payments in Canstar’s database – excluding introductory, construction and first homebuyer only home loans.
Ms Tindall said whatever happens, no one expects RBA to come out firing on May 20.
“They may end up cutting the cash rate again in May, or perhaps the meeting after in July, but I can’t see them coming out and firing off a double cut.”
“One of the biggest pieces in the puzzle will be the inflation data out next Wednesday,” she said. “All bets are off until we see that data.”
AMP moved to lower its interest rates on Tuesday. Picture: NCA NewsWire / Steven Saphore
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But Ms Tindall added “Australia’s unemployment rate is still not any cause for alarm. This gives the RBA plenty of cover to take it slow if they choose to do so.”
She urged borrowers to exercise their right to negotiate with their lender if they were on a variable rate.
“If your bank is advertising a lower rate for new customers than what you’re on, use that as a fantastic opening argument for getting yourself your own personalised rate cut.”
“If you don’t like the interest rate that your lender is offering, it’s your right to pick up your home loan and move it to a different bank that will hopefully provide you with a more competitive rate or better suited home loan.” She cautioned though that there were costs involved in refinancing, and you need to own 20 per cent of your home to avoid lenders mortgage insurance.
Borrowers have been urged to negotiate with their bank for a better rate if they were on a variable package. Picture: Richard Dobson
Ms Tindall warned those wishing for multiple rate cuts to consider what that would signal about the economy.
“If we’re going for a rapid fire series of cash rate cuts that means the Australian economy is in trouble. It means that the RBA is feeling the need to bail it out and to help protect Australian jobs.”
“So while borrowers across the country would love the idea of four or five rate cuts, it could also spell trouble elsewhere in the economy. Cash rate cuts will help someone pay the mortgage, but if you don’t have a job that’s going to be incredibly difficult, even with four cash rate cuts.”
