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The lenders that are cutting home loan rates so far

The lenders that are cutting home loan rates so far

More than 50 lenders have committed to reducing variable rates on home loans, three days after the Reserve Bank of Australia slashed the official cash rate to a new record low of 0.50 per cent.

Of the 55 that have announced rate cuts, 47, including the big four, intend to pass on the full cut of 0.25 basis points, likely due to political pressure from Prime Minister Scott Morrison.

This is in stark contrast to the previous cut in October 2019, where only 16 of the 66 lenders that lowered their rates passed on the full cut.

After the October cut, the big four banks only passed on an average of 0.14 per cent to their owner-occupier customers on variable rate loans, RateCity research shows. This average dropped from 0.21 per cent after the July cut and 0.22 per cent following the June cut.

Notably, several banks intend to pass on a cut of 0.25 per cent or more for investor customers only, suggesting some lenders may be ramping up efforts to chase business from investors.

For example, ANZ has announced it will pass on the full cut to owner-occupiers but a bigger cut of 0.35 per cent for investors on interest-only mortgages.

The lenders that have announced cuts to owner-occupier home loan rates

LenderRate cut for variable home loans (%)NotesDate effective
86 400-0.25March 4th
Adelaide Bank-0.25March 27th
AMP Bank-0.25March 13th
ANZ-0.25-0.25 for owner-occupier P&I and interest-only, plus investor P&IMarch 13th
Athena Home Loans-0.25March 3rd
Australian Military Bank-0.25March 26th
Auswide Bank-0.25March 5th and 27th (depending on loan)
Bank Australia-0.25March 24th
Bank First-0.25March 25th
Bank of Melbourne-0.25March 17th
Bank of Queensland-0.17April 3rd
BankSA-0.25March 17th
BankVic-0.25March 5th
Bankwest-0.25March 18th
BCU-0.25March 1st
Bendigo Bank-0.25March 27th
Citi-0.25March 24th
Coastline Credit Union-0.25March 1st
Commonwealth Bank of Australia-0.25March 24th
Community First Credit Union-0.10March 30th
CUA-0.25March 24th
Defence Bank-0.25March 12th
Firstmac-0.25Existing customers onlyMarch 26th
Freedom Lend-0.25-0.25 in general, -0.20 for special loansMarch 3rd
Greater Bank-0.25Existing customers onlyMarch 23rd
Heritage Bank-0.20March 25th
Homestar Finance-0.25March 3rd
HSBC-0.25March 23rd
Hume Bank-0.20Existing customers onlyMarch 18th
Hunter United-0.15March 13th
IMB Bank-0.25March 24th
ING-0.25March 18th
Liberty Financial-0.25March 24th
loans.com.au-0.25Existing customers onlyMarch 26th
Macquarie Bank-0.25March 19th
ME Bank-0.25Existing customers onlyMarch 26th
MyState Bank-0.25March 31st
NAB-0.25March 13th
Newcastle Permanent-0.25March 24th
P&N Bank-0.25March 20th
People's Choice Credit Union-0.25Existing members onlyMarch 17th
Pepper Money-0.25Existing customers onlyMarch 16th
Qudos Bank-0.25March 23rd
RACQ Bank-0.17TBC
RAMS-0.25March 17th
Reduce Home Loans-0.25TBC for existing customersMarch 3rd
Resimac-0.25Existing customers onlyMarch 26th
St George Bank-0.25March 17th
Suncorp Bank-0.25March 20th
The Capricornian-0.20Cut applies to Standard Variable Loans onlyMarch 23rd
The Mutual-0.25March 16th
UBank-0.25April 3rd
Virgin Money-0.17April 3rd
Westpac-0.25March 17th
Yard-0.25March 5th

*Data correct as of 3pm, March 6th 2020.

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This article was reviewed by Personal Finance Editor Alex Ritchie before it was published as part of RateCity's Fact Check process.

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Learn more about home loans

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.

Cash or mortgage – which is more suitable to buy an investment property?

Deciding whether to buy an investment property with cash or a mortgage is a matter or personal choice and will often depend on your financial situation. Using cash may seem logical if you have the money in reserve and it can allow you to later use the equity in your home. However, there may be other factors to think about, such as whether there are other debts to pay down and whether it will tie up all of your spare cash. Again, it’s a personal choice and may be worth seeking personal advice.

A mortgage is a popular option for people who don’t have enough cash in the bank to pay for an investment property. Sometimes when you take out a mortgage you can offset your loan interest against the rental income you may earn. The rental income can also help to pay down the loan.

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.

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

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.

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.

How do I find out my current interest rate and how much is owing on my loan?

Your bank statements and/or your internet banking should show these details. If you are not sure, call your bank or estimate.

How to apply for a pre-approval home loan from Bendigo Bank?

Applying for pre-approval on your home loan gives you confidence in your ability to secure finance while looking at potential new homes. You can get a free and personalised pre-approval home loan from Bendigo Bank in just a few minutes, without any credit checks or paperwork. 

Bendigo Bank offers pre-approval for home loans that allow you to understand the home loan size you may be able to get before looking for a new home. 

With the pre-approval, Bendigo Bank provides an estimate of your borrowing power. This figure incorporates stamp duty, lenders mortgage insurance (LMI) and any first home buyer incentives you may be eligible for. You may also qualify for the First Home Loan Deposit Scheme initiative, depending on your circumstances. 

To apply for a pre-approval on your home loan from Bendigo Bank, all you need to do is fill in a smart form. You could also contact the bank directly on 1300 236 344.

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.

How do I apply for a home loan pre-approval from Commonwealth Bank?

To apply for a Commbank home loan pre-approval, you can either call the bank at 13 2224 or meet one of the bank’s lending specialists. You can set up a meeting online if you wish. You’ll need to do some homework before contacting the bank, such as gathering information on the kind of properties you’d like to buy and their prices.

Preparing a financial summary, which lists all your income sources as well as significant expenses, can also help determine how much you can afford to borrow. You may also want to check your credit score before applying for pre-approval.

It’s worth remembering that a CBA home loan pre-approval doesn’t guarantee that you’ll get the loan. Once you get the pre-approval, you’ll have about three to six months to decide on a property and apply for the home loan. The bank will then confirm that the property is suitable for the loan before fully approving it.

How long should I have my mortgage for?

The standard length of a mortgage is between 25-30 years however they can be as long as 40 years and as few as one. There is a benefit to having a shorter mortgage as the faster you pay off the amount you owe, the less you’ll pay your bank in interest.

Of course, shorter mortgages will require higher monthly payments so plug the numbers into a mortgage calculator to find out how many years you can potentially shave off your budget.

For example monthly repayments on a $500,000 over 25 years with an interest rate of 5% are $2923. On the same loan with the same interest rate over 30 years repayments would be $2684 a month. At first blush, the 30 year mortgage sounds great with significantly lower monthly repayments but remember, stretching your loan out by an extra five years will see you hand over $89,396 in interest repayments to your bank.

What is Lender's Mortgage Insurance (LMI)

Lender’s Mortgage Insurance (LMI) is an insurance policy, which protects your bank if you default on the loan (i.e. stop paying your loan). While the bank takes out the policy, you pay the premium. Generally you can ‘capitalise’ the premium – meaning that instead of paying it upfront in one hit, you roll it into the total amount you owe, and it becomes part of your regular mortgage repayments.

This additional cost is typically required when you have less than 20 per cent savings, or a loan with an LVR of 80 per cent or higher, and it can run into thousands of dollars. The policy is not transferrable, so if you sell and buy a new house with less than 20 per cent equity, then you’ll be required to foot the bill again, even if you borrow with the same lender.

Some lenders, such as the Commonwealth Bank, charge customers with a small deposit a Low Deposit Premium or LDP instead of LMI. The cost of the premium is included in your loan so you pay it off over time.