RBA cuts the cash rate, which banks have moved?

RBA cuts the cash rate - which banks have moved?

Following the RBA’s cash rate cut, all eyes are on lenders to see if they intend to pass this cut on. A full list of lenders who have announced their lowering rates is below.

Company Cut* Effective Date Notes
AMP Bank 0.20% 20/05/2016   Effective 23 May for existing customers
ANZ 0.19% 13/05/2016  
Australian Military Bank 0.25% 27/06/2016  
Auswide Bank 0.20% 25/05/2016   0.15% for investors
Bank of Melbourne 0.25% 23/05/2016  
BankSA 0.25% 23/05/2016  
BankVic 0.25% 16/05/2016  
Bankwest 0.20% 20/05/2016  
Bendigo Bank 0.20% 30/05/2016   0.15% for investors
BOQ 0.25% 18/05/2016  
Citibank 0.21% 23/05/2016  
Coastline Credit Union 0.25% 16/05/2016  
Commonwealth Bank 0.25% 20/05/2016  
CUA 0.25% 19/05/2016   0.20% for investors
First Option Credit Union 0.25% 9/05/2016   Effective 1 June for existing customers
Firstmac 0.25% 23/05/2016  
G&C Mutual Bank 0.12% 6/05/2016   0.12% only applies to some products
Greater Bank 0.25% 9/05/2016   Effective 16 May for existing customers
Heritage Bank 0.20% 23/05/2016  
Homestar Finance 0.25% 5/05/2016  
HSBC 0.25% 23/05/2016  
IMB 0.25% 23/05/2016  
ING DIRECT 0.25% 20/05/2016  
Loans.com.au 0.25% 4/05/2016   Effective 23 May for existing customers
ME Bank 0.05% 16/05/2016  
ME Bank 0.05% 16/05/2016  
Mortgage House 0.25% 6/05/2016   Effective 27 May for existing customers
NAB 0.25% 16/05/2016  
Newcastle Permanent 0.25% 19/05/2016  
P&N Bank 0.14% 5/05/2016   On one product. No change for the others.
Pacific Mortgage Group 0.25% 16/05/2016  
Qudos Bank 0.25%    
Queensland Police Credit Union 0.25% 23/05/2016  
RAMS 0.25% 23/05/2016  
Reduce Home Loans 0.20% 5/05/2016  
St.George Bank 0.25% 23/05/2016  
Summerland Credit Union 0.25%    
Suncorp Bank 0.20% 25/05/2016   0.15% for investors
Teachers Mutual Bank 0.25% 12/05/2016   Effective 1 June for existing customers
UBank 0.25% 16/05/2016  
Westpac 0.25% 23/05/2016  
Yellow Brick Road 0.25% 9/05/2016   Effective 25 May for existing customers
Your Credit Union 0.25% 1/06/2016  

The table above shows all lenders who have identifed a rate cut. Cuts listed are the max rate cut applied to variable rate products  For a full rate table click here. Calculate your change in monthly repayments here.

So has your lender cut?

If not, there’s still time as lenders are expected to be passing on the cash rate cut for another couple of weeks. If you’re sick of waiting for your lender to take action though there’s never been a better time to take the lead.

With the cash rate at a new historic low, and lenders working even harder to compete for customer’s business, negotiating a better rate from your lender or taking your business elsewhere has never been easier.

If your lender hasn’t moved their rate, or you’re currently paying above 4 per cent, now is the time to use the market to your advantage. Contacting your lender and negotiating an interest rate cut should be your first step but if you’re not making any headway it could be time to switch lenders.

Time to refinance  

If you’re considering refinancing to get a better home loan rate the first step is doing some sums to make sure it’s the best move for you. A home loan may have a better interest rate than the one that you’re currently on but if you’re near the end of your loan and you will have to pay application fees to start up a new loan it may not be worth the time and money.

If you do work out the costs and refinancing is the best way to go then the next step is starting to search the market. Using the RateCity comparison table is a great way to sort home loans by interest rate and comparison rate to get a good understanding of the loan’s competitiveness.

You can also use the search filters to find loans that are best suited to your needs by selecting the features you want, the purpose of your loan and the amount you need to borrow. 

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Learn more about home loans

What are the features of home loans for expats from Westpac?

If you’re an Australian citizen living and working abroad, you can borrow to buy a property in Australia. With a Westpac non-resident home loan, you can borrow up to 80 per cent of the property value to purchase a property whilst living overseas. The minimum loan amount for these loans is $25,000, with a maximum loan term of 30 years.

The interest rates and other fees for Westpac non-resident home loans are the same as regular home loans offered to borrowers living in Australia. You’ll have to submit proof of income, six-month bank statements, an employment letter, and your last two payslips. You may also be required to submit a copy of your passport and visa that shows you’re allowed to live and work abroad.

When do mortgage payments start after settlement?

Generally speaking, your first mortgage payment falls due one month after the settlement date. However, this may vary based on your mortgage terms. You can check the exact date by contacting your lender.

Usually your settlement agent will meet the seller’s representatives to exchange documents at an agreed place and time. The balance purchase price is paid to the seller. The lender will register a mortgage against your title and give you the funds to purchase the new home.

Once the settlement process is complete, the lender allows you to draw down the loan. The loan amount is debited from your loan account. As soon as the settlement paperwork is sorted, you can collect the keys to your new home and work your way through the moving-in checklist.

What happens to my home loan when interest rates rise?

If you are on a variable rate home loan, every so often your rate will be subject to increases and decreases. Rate changes are determined by your lender, not the Reserve Bank of Australia, however often when the RBA changes the cash rate, a number of banks will follow suit, at least to some extent. You can use RateCity cash rate to check how the latest interest rate change affected your mortgage interest rate.

When your rate rises, you will be required to pay your bank more each month in mortgage repayments. Similarly, if your interest rate is cut, then your monthly repayments will decrease. Your lender will notify you of what your new repayments will be, although you can do the calculations yourself, and compare other home loan rates using our mortgage calculator.

There is no way of conclusively predicting when interest rates will go up or down on home loans so if you prefer a more stable approach consider opting for a fixed rate loan.

Why does Westpac charge an early termination fee for home loans?

The Westpac home loan early termination fee or break cost is applicable if you have a fixed rate home loan and repay part of or the whole outstanding amount before the fixed period ends. If you’re switching between products before the fixed period ends, you’ll pay a switching break cost and an administrative fee. 

The Westpac home loan early termination fee may not apply if you repay an amount below the prepayment threshold. The prepayment threshold is the amount Westpac allows you to repay during the fixed period outside your regular repayments.

Westpac charges this fee because when you take out a home loan, the bank borrows the funds with wholesale rates available to banks and lenders. Westpac will then work out your interest rate based on you making regular repayments for a fixed period. If you repay before this period ends, the lender may incur a loss if there is any change in the wholesale rate of interest.

How much of the RBA rate cut do lenders pass on to borrowers?

When the Reserve Bank of Australia cuts its official cash rate, there is no guarantee lenders will then pass that cut on to lenders by way of lower interest rates. 

Sometimes lenders pass on the cut in full, sometimes they partially pass on the cut, sometimes they don’t at all. When they don’t, they often defend the decision by saying they need to balance the needs of their shareholders with the needs of their borrowers. 

As the attached graph shows, more recent cuts have seen less lenders passing on the full RBA interest rate cut; the average lender was more likely to pass on about two-thirds of the 25 basis points cut to its borrowers.  image002

What is a variable home loan?

A variable rate home loan is one where the interest rate can and will change over the course of your loan. The rate is determined by your lender, not the Reserve Bank of Australia, so while the cash rate might go down, your bank may decide not to follow suit, although they do broadly follow market conditions. One of the upsides of variable rates is that they are typically more flexible than their fixed rate counterparts which means that a lot of these products will let you make extra repayments and offer features such as offset accounts.

What is the difference between a fixed rate and variable rate?

A variable rate can fluctuate over the life of a loan as determined by your lender. While the rate is broadly reflective of market conditions, including the Reserve Bank’s cash rate, it is by no means the sole determining factor in your bank’s decision-making process.

A fixed rate is one which is set for a period of time, regardless of market fluctuations. Fixed rates can be as short as one year or as long as 15 years however after this time it will revert to a variable rate, unless you negotiate with your bank to enter into another fixed term agreement

Variable rates is that they are typically more flexible than their fixed rate counterparts which means that a lot of these products will let you make extra repayments and offer features such as offset accounts however fixed rates do offer customers a level of security by knowing exactly how much they need to set aside each month.

What is a comparison rate?

The comparison rate is a more inclusive way of comparing home loans that factors in not only on the interest rate but also the majority of upfront and ongoing charges that add to the total cost of a home loan.

The rate is calculated using an industry-wide formula based on a $150,000 loan over a 25-year period and includes things like revert rates after an introductory or fixed rate period, application fees and monthly account keeping fees.

In Australia, all lenders are required by law to publish the comparison rate alongside their advertised rate so people can compare products easily.

What is the difference between fixed, variable and split rates?

Fixed rate

A fixed rate home loan is a loan where the interest rate is set for a certain amount of time, usually between one and 15 years. The advantage of a fixed rate is that you know exactly how much your repayments will be for the duration of the fixed term. There are some disadvantages to fixing that you need to be aware of. Some products won’t let you make extra repayments, or offer tools such as an offset account to help you reduce your interest, while others will charge a significant break fee if you decide to terminate the loan before the fixed period finishes.

Variable rate

A variable rate home loan is one where the interest rate can and will change over the course of your loan. The rate is determined by your lender, not the Reserve Bank of Australia, so while the cash rate might go down, your bank may decide not to follow suit, although they do broadly follow market conditions. One of the upsides of variable rates is that they are typically more flexible than their fixed rate counterparts which means that a lot of these products will let you make extra repayments and offer features such as offset accounts.

Split rates home loans

A split loan lets you fix a portion of your loan, and leave the remainder on a variable rate so you get a bet each way on fixed and variable rates. A split loan is a good option for someone who wants the peace of mind that regular repayments can provide but still wants to retain some of the additional features variable loans typically provide such as an offset account. Of course, with most things in life, split loans are still a trade-off. If the variable rate goes down, for example, the lower interest rates will only apply to the section that you didn’t fix.

What is a honeymoon rate and honeymoon period?

Also known as the ‘introductory rate’ or ‘bait rate’, a honeymoon rate is a special low interest rate applied to loans for an initial period to attract more borrowers. The honeymoon period when this lower rate applies usually varies from six months to one year. The rate can be fixed, capped or variable for the first 12 months of the loan. At the end of the term, the loan reverts to the standard variable rate.

What is a standard variable rate (SVR)?

The standard variable rate (SVR) is the interest rate a lender applies to their standard home loan. It is a variable interest rate which is normally used as a benchmark from which they price their other variable rate home loan products.

A standard variable rate home loan typically includes most, if not all the features the lender has on offer, such as an offset account, but it often comes with a higher interest rate attached than their most ‘basic’ product on offer (usually referred to as their basic variable rate mortgage).

Does the Home Loan Rate Promise apply to discounted interest rate offers, such as honeymoon rates?

No. Temporary discounts to home loan interest rates will expire after a limited time, so they aren’t valid for comparing home loans as part of the Home Loan Rate Promise.

However, if your home loan has been discounted from the lender’s standard rate on a permanent basis, you can check if we can find an even lower rate that could apply to you.

When should I switch home loans?

The answer to this question is dependent on your personal circumstances – there is no best time for refinancing that will apply to everyone.

If you want a lower interest rate but are happy with the other aspects of your loan it may be worth calling your lender to see if you can negotiate a better deal. If you have some equity up your sleeve – at least 20 per cent – and have done your homework to see what other lenders are offering new customers, pick up the phone to your bank and negotiate. If they aren’t prepared to offer you lower rate or fees, then you’ve already done the research, so consider switching.

What is the Home Loan Rate Promise?

The Home Loan Rate Promise is RateCity putting its money where its mouth is. We believe that too many Australians are paying too much for their home loans. We’re so confident we can help Aussies save money, if we can’t beat your current rate, we’ll give you a $100 gift card.*

There are two reasons it pays to check your rate with the Home Loan Rate Promise:

  • You can find out how much you could save on your home loan by switching to a loan with a lower interest rate
  • If we can’t beat your current rate, you can claim a $100 gift card with our Home Loan Rate Promise*