Battle for borrowers heats up
The bank dropped its one-year fixed rate home loans to 4.79 per cent, while its Bank of Melbourne and St George divisions lowered their one to five-year fixed rates to below 5 per cent. Mortgage rates are at their lowest since the global financial crisis.
"It's a further continuation of injecting more competition into the home loan marketplace, and also a confidence booster given that we've got the lowest government cash rate for 53 years," Bank of Melbourne chief executive Scott Tanner said.
The Reserve Bank's decision to slash the cash rate to 2.75 per cent on May 7 saw a flurry of lenders, including the big four banks, pass on the 25-basis-points cut in full.
ANZ took a step further by dropping its standard variable mortgage rate by 0.27 percentage points to 6.13 per cent, matching NAB.
Westpac has the highest standard variable mortgage rate among the big four with 6.26 per cent. Commonwealth Bank and ANZ were contacted for comment. A NAB spokesman said the bank had no comment at this time.
The moves came amid lower funding costs for banks and strong profit growth.
"I think it presents a bit of a borrowers' dilemma about whether to lock in now or hold back and see if rates fall further," said Kirsty Lamont, of comparison site Mozo, adding that the Greater Building Society had the lowest fixed one-year rate at 4.74 per cent.
"The fact that the banks are cutting their fixed rates again so aggressively shows they are pricing further rate cuts from the Reserve Bank down the track."
In March, 18.45 per centof home loans financed through financial comparison website RateCity were fixed, the highest proportion in five years, said its spokeswoman, Michelle Hutchison.
Changing lending conditions such as "out-of-cycle" mortgage rate cuts independent of the RBA's actions and the banning of early exit fees on variable rate mortgages in mid-2011 were contributing factors, she said.
A Westpac spokesman said the bank's take-up levels for fixed home loans doubled from about 8 per cent to between 15 and to 20 per cent after it slashed its two-year rate to 4.99 per cent in February.
Mr Tanner expected the proportion of St George's fixed-rate loans to rise from about 10 per cent to about 30 per cent as mortgage rates drop.
Financial markets were pricing in a 20 per cent chance of a 25 basis points interest rate reduction for June, and tipping at least one 25-basis-points cut by the end of the year, Credit Suisse data showed.
The housing market has experienced patchy growth since the financial crisis. At the same time, auction clearance rates in Sydney and Melbourne have improved.
At the weekend, Sydney's auction clearance rate was 78.6 per cent - its highest in three years, while Melbourne recorded its highest auction clearance rate for the year at 73.6 per cent, Fairfax Media's Australian Property Monitors data showed.
Frequently Asked Questions about this Article…
Westpac cut its one-year fixed-rate home loan to 4.79%. Its Bank of Melbourne and St George divisions also lowered one- to five-year fixed rates to below 5%, part of a wave of aggressive fixed-rate cuts across lenders after the Reserve Bank's cash rate move.
The Reserve Bank cut the cash rate to 2.75% on May 7, and a number of lenders — including the big four — passed that 25 basis-point cut on in full. The article says lower funding costs and strong profit growth have helped banks cut fixed rates, and many lenders appear to be pricing in further RBA cuts.
ANZ cut its standard variable mortgage rate by 0.27 percentage points to 6.13%, matching NAB's standard variable rate. Westpac has the highest standard variable rate among the big four at 6.26%. (The article notes Commonwealth Bank and ANZ were contacted for comment and NAB had no comment at the time.)
The article highlights a common borrower dilemma: lock in now or wait to see if rates fall further. Mozo's Kirsty Lamont says aggressive bank cuts suggest lenders are pricing in more Reserve Bank cuts, while market data in the article put only a modest chance of further cuts in the near term — so it's a trade-off borrowers should weigh carefully.
Yes. RateCity data cited in the article showed 18.45% of home loans financed in March were fixed — the highest proportion in five years. Westpac also reported take-up of fixed home loans doubled from about 8% to between 15% and 20% after a February two-year rate cut, and St George expects its fixed share to rise from about 10% to around 30% as rates fall.
The article points to lower bank funding costs and strong profit growth as key drivers. It also cites structural changes — such as earlier out-of-cycle mortgage cuts and the 2011 banning of early exit fees on variable mortgages — as contributing to more competitive pricing in the fixed-rate market.
According to the article, the housing market has seen patchy growth since the global financial crisis, but auction clearance rates in Sydney and Melbourne have improved recently. Sydney recorded a 78.6% clearance rate (its highest in three years) and Melbourne 73.6% (the highest for the year), suggesting lower mortgage rates may be supporting stronger activity at auctions.
The article quotes Mozo saying the Greater Building Society had the lowest one-year fixed rate at 4.74%, slightly below Westpac's one-year fixed of 4.79%.
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