Battle for borrowers heats up
Westpac has fired the latest salvo in the fixed-rate home loan wars as lenders battle for new borrowers following the Reserve Bank's cash rate cut.
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 cent of 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 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-point interest rate reduction for June, and tipping at least one 25-basis-point 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.