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Bankwest, ME and UBank to cut interest rates

Bankwest, ME and UBank to cut interest rates

Australia’s tenth largest bank ME bank has today cut its variable and fixed interest rates by up to 0.26 per cent, on the same day as competitor UBank also announced fixed rate cuts of up to 0.30 per cent effective Friday, 17 May.

Both lenders have cut rates across their owner-occupier and investor home loans (see tables below).

RateCity.com.au research director Sally Tindall said it’s good to see competition in the home loan market heating up.

“The big four banks have all cut their fixed rates in recent weeks forcing smaller lenders like ME and UBank to follow suit to stay in the game,” she said.

“We’re likely to see more lenders drop their fixed rates in coming weeks, particularly as speculation of an RBA rate cut mounts.”

Today Greater Bank went against the trend and raised all its variable rates by 0.10 per cent. The lowest variable rate now offered by Greater Bank is now 3.82 per cent for new customers only.

ME bank rate changes

Owner-occupier (P&I)

Cut

New rate

Variable ($400-$700K)

-0.08%

3.79%

3-year fixed  ≤80% LVR

-0.21%

3.58%

Investor (P&I)

Cut

New rate

Variable ($400-$700K) ≤80% LVR

-0.10%

4.17%

2-year fixed  ≤80% LVR

-0.26%

3.88%


UBank rate changes

Owner-occupier (P&I)CutNew rate
3-year fixed-0.15%3.59%
5-year fixed-0.15%3.94%
Investor (P&I)Investor (interest only)
CutNew rateCutNew rate
1-year fixed3.99%*-0.054.14%
3-year fixed3.99%*-0.05%4.14%
5-year fixed-0.25%4.24%-0.30%4.39%

Bankwest also cuts rates

Bankwest has announced cuts to its fixed rates, effective on Friday 17 May.

The most notable change from Bankwest is a 0.50 per cent cut to its 3-year owner-occupier fixed home loan. At 3.48 per cent, this will make it the lowest 3-year fixed rate on the market.

RateCity.com.au research director Sally Tindall said, “Fixed rate cuts are coming thick and fast, as lenders scramble to remain competitive.”

Bankwest Product

Old rate

New rate

Change

Complete fixed home loan, 3 years, owner occupier

3.98%

3.48%

-0.50%

Complete fixed home loan, 3 years, investor

4.08%

3.88%

-0.20%

Note: Rates are for customers paying principal and interest. Rates effective 17.05.2019

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Fact Checked -

This article was reviewed by Research Director Sally Tindall before it was published as part of RateCity's Fact Check process.

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Learn more about home loans

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 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 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.

What is a fixed home loan?

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.