How the big four banks are responding to the coronavirus crisis

Here is a summary of how the big four banks have responded to the emergency RBA cash rate cut amidst the coronavirus crisis.

CBA

Home loans:

  • 70-basis point cut to 1-, 2-, and 3-year fixed rates – all to 2.29%.
  • No cuts for variable home loan customers.
  • Reduction of repayments to minimum required under their loan contract & easier access to overdraft facilities.
  • Hardship support – deferral of business term loan repayments and overdrafts up to six months.

Term deposits:

  • 12-month term deposit rate hiked 60 basis points to 1.70%.

Small businesses:

  • 1.00% reduction to cash-linked small business loans.
  • Hardship support – deferral of business term loan repayments and overdrafts.
  • Deferring repayments on vehicle and equipment finance loans and providing tailored restructuring options that meet individual customer needs.
  • Waiving of:
    • Merchant terminal fees
    • Redraw fees
    • Early redraw fees
    • Establishment fees and excess interest on Temporary Excess products.

Westpac

Home loans:

  • 90-basis points cuts to 1-, 2-, and 3-year fixed rates – all to 2.19%.
  • No cuts for variable home loan customers.
  • Hardship support – deferral of home loan repayments for six months.

Term deposits:

  • Special 12-month term deposit of 1.70%. 

Small businesses:

  • 1.00% reduction to variable interest rates on small business cash-based loans.
  • Overdrafts reduced by 2.00%.
  • Hardship support – deferral of business term loan repayments for six months.
  • Merchant terminal rental fee waivers for up to three months.

NAB

Home loans:

  • 60-basis points cut to fixed rates – lowest to 2.19%.
  • No changes to home loan variable rates.
  • Hardship support – deferral of home loan repayments up to six months.

Term deposits:

  • Introduced a 10-month term deposit rate of 1.75% on deposits of $5,000 to $2 million from 24 March.

Small businesses:

  • Hardship support: Deferral of principal and interest for up to six months on a range of business loans, including floating and variable rates, and equipment finance loans. Also deferral of business credit card repayments.
  • 200-basis point rate cut on new loans and all overdrafts on QuickBiz from 30 March.
  • Additional 100-basis point cut on variable rates for small business loans, effective 30 March, on top of a 25-bps reduction earlier in March.
  • Access to up to $65 billion in additional secured limits to pre-assessed customers, with $7 billion currently available for fast assessment process.
  • Access to up to $9 billion in additional limits for unsecured lending for existing customers via QuickBiz.

ANZ

Home Loans:

  • 49-basis points cut to fixed rates – lowest to 2.19%.
  • Cut variable rates for both new and existing home loan customers by 0.15 per cent from 27 March.
  • Hardship support – deferral of home loan repayments up to six months.

Small businesses:

  • Cut variable interest small business loan rates in Australia by 0.25%, effective from 27 March 2020, resulting in a 0.50% pa reduction since last week.
  • 80-basis points cut to fixed rates – cut to 2.59% for secured small business loans up to $1 million, effective 3 April 2020.
  • Hardship support - all impacted customers can request a six-month payment deferral on loan repayments for term loans, with interest capitalised.
  • Made temporary increases in overdraft facilities for 12 months available.

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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 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 split home loan?

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 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.

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.

Who has the best home loan?

Determining who has the ‘best’ home loan really does depend on your own personal circumstances and requirements. It may be tempting to judge a loan merely on the interest rate but there can be added value in the extras on offer, such as offset and redraw facilities, that aren’t available with all low rate loans.

To determine which loan is the best for you, think about whether you would prefer the consistency of a fixed loan or the flexibility and potential benefits of a variable loan. Then determine which features will be necessary throughout the life of your loan. Thirdly, consider how much you are willing to pay in fees for the loan you want. Once you find the perfect combination of these three elements you are on your way to determining the best loan for you. 

What are extra repayments?

Additional payments to your home loan above the minimum monthly instalments, which can help to reduce the loan’s term and remaining payable interest.

How do I refinance my home loan?

Refinancing your home loan can involve a bit of paperwork but if you are moving on to a lower rate, it can save you thousands of dollars in the long-run. The first step is finding another loan on the market that you think will save you money over time or offer features that your current loan does not have. Once you have selected a couple of loans you are interested in, compare them with your current loan to see if you will save money in the long term on interest rates and fees. Remember to factor in any break fees and set up fees when assessing the cost of switching.

Once you have decided on a new loan it is simply a matter of contacting your existing and future lender to get the new loan set up. Beware that some lenders will revert your loan back to a 25 or 30 year term when you refinance which may mean initial lower repayments but may cost you more in the long run.

How do I know if I have to pay LMI?

Each lender has its own policies, but as a general rule you will have to pay lender’s mortgage insurance (LMI) if your loan-to-value ratio (LVR) exceeds 80 per cent. This applies whether you’re taking out a new home loan or you’re refinancing.

If you’re looking to buy a property, you can use this LMI calculator to work out how much you’re likely to be charged in LMI.

What happens when you default on your mortgage?

A mortgage default occurs when you are 90 days or more behind on your mortgage repayments. Late repayments will often incur a late fee on top of the amount owed which will continue to gather interest along with the remaining principal amount.

If you do default on a mortgage repayment you should try and catch up in next month’s payment. If this isn’t possible, and missing payments is going to become a regular issue, you need to contact your lender as soon as possible to organise an alternative payment schedule and discuss further options.

You may also want to talk to a financial counsellor. 

How personalised is my rating?

Real Time Ratings produces instant scores for loan products and updates them based what you tell us about what you’re looking for in a loan. In that sense, we believe the ratings are as close as you get to personalised; the more you tell us, the more we customise to ratings to your needs. Some borrowers value flexibility, while others want the lowest cost loan. Your preferences will be reflected in the rating. 

We also take a shorter term, more realistic view of how long borrowers hold onto their loan, which gives you a better idea about the true borrowing costs. We take your loan details and calculate how much each of the relevent loans would cost you on average each month over the next five years. We assess the overall flexibility of each loan and give you an easy indication of which ones are likely to adjust to your needs over time. 

How often is your data updated?

We work closely with lenders to get updates as quick as possible, with updates made the same day wherever possible.

How can I get a home loan with no deposit?

Following the Global Financial Crisis, no-deposit loans, as they once used to be known, have largely been removed from the market. Now, if you wish to enter the market with no deposit, you will require a property of your own to secure a loan against or the assistance of a guarantor.

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