More lenders hold back part of the rate cut

More lenders hold back part of the rate cut

A growing number of banks have decided not to pass on the full 0.25 per cent RBA rate cut.

Australia’s second largest bank Westpac, and its subsidiaries St George, Bank of Melbourne, Bank SA and RAMS will pass on a 0.20 per cent cut to their owner-occupier customers. They are however, cutting investor interest-only rates above and beyond the RBA, by 0.35 per cent.

Suncorp Bank has also announced it will cut all variable home loan interest rates by 0.20 per cent, effective 21 June.

This follows ANZ’s decision yesterday to pass on just 0.18 per cent – the smallest cut to date.

RateCity.com.au research director Sally Tindall said by holding back part of the cut for themselves, these banks risk angering their loyal customers.

“A lot of Westpac and ANZ variable rate customers will be frustrated by this news, but it’s important for them to remember, they don’t have to take it lying down,” she said.

“One of the best things about being on a variable rate is that you’re well within your rights to take your business elsewhere.

“Check whether your lender is passing on the rate cut, but also see what the competition is offering, because ultimately the lower the comparison rate, the more money you’re likely to have left in your pocket.

“Although it’s good to see Australia’s largest bank, CBA, pass on the full cut, it’s a pity they are making their customers wait three weeks before they see any savings.”

Other lenders passing on the full 0.25 per cent rate cut include:

  • Macquarie Bank
  • Athena
  • Greater Bank
  • BCU
  • Homestar Finance
  • Newcastle Permanent

For a live list of who’s moved visit: https://www.ratecity.com.au/rba-cash-rate.

Big bank moves for owner occupiers paying principal and interest

Bank Cut New standard variable rate New discounted variable rate New lowest variable rate
CBA 0.25% 5.12% 4.52% 3.54%
Westpac 0.20% 5.18% 4.38% 3.78%
NAB 0.25% 5.11% 4.26% 3.54%
ANZ 0.18% 5.18% 4.38% 3.63%

Source: RateCity.com.au

Note: ANZ and NAB rates effective 14 June 2019, Westpac rates effective 18 June and CBA rates are effective 25 June 2019. Rates are for a loan size of $400K.

How much the average ANZ and Westpac home loan customer is missing out on with a $400K loan:

Missed savings

Monthly

Missed savings

Annual

ANZ $16 $198
Westpac $11 $141

Source: RateCity.com.au

Note: Based on an owner occupier on a discounted variable rate paying principal and interest over 30 years with a $400K home loan.

Who’s moved already?

Lender Rate change Date effective New lowest rate
ANZ -0.18% 14/06/2019 3.63%
CBA -0.25% 25/06/2019 3.54%
NAB -0.25% 14/06/2019 3.54%
Westpac -0.20% 18/06/2019 3.78%
Reduce Home Loans up to -0.25% 04/06/2019 3.19%
Athena Home Loans -0.25% 04/06/2019 3.34%
RACQ Bank -0.25% from 10/06/2019 3.44%
Macquarie Bank -0.25% 21/06/2019 3.44%
BCU -0.25% 01/07/2019 3.54%
Auswide One product -0.25% 06/06/2019 3.69%
BankSA -0.20% 18/06/2019 3.59%
Bank of Melbourne -0.20% 18/06/2019 3.54%
St George -0.20% 18/06/2019 3.58%
RAMS -0.20% 18/06/2019 3.79%
Suncorp -0.20% 21/06/2019 3.49%
Homestar Finance -0.25% Immediately 3.24%
Greater Bank -0.25% 11/06/2019 3.57%
Newcastle Permanent -0.25% 17/06/2019 TBC

Source: RateCity.com.au

Note: Westpac Group is cutting by 0.35% for investors paying interest only however every other variable product is 0.20%

Some of the lowest variable rates following yesterday’s announcement

Lender Rate
Reduce Home Loans 3.19%
Homestar Finance 3.24%
Mortgage House 3.29%
Athena Home Loans 3.34%

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Learn more about home loans

What do people do with a Macquarie Bank reverse?

There are a number of ways people use a Macquarie Bank reverse mortgage. Below are some reasons borrowers tend to release their home’s equity via a reverse mortgage:

  • To top up superannuation or pension income to pay for monthly bills;
  • To consolidate and repay high-interest debt like credit cards or personal loans;
  • To fund renovations, repairs or upgrades to their home
  • To help your children or grandkids through financial difficulties. 

While there are no limitations on how you can use a Macquarie reverse mortgage loan, a reverse mortgage is not right for all borrowers. Reverse mortgages compound the interest, which means you end up paying interest on your interest. They can also affect your entitlement to things like the pension It’s important to think carefully, read up and speak with your family before you apply for a reverse mortgage.

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.

How is interest charged on a reverse mortgage from IMB Bank?

An IMB Bank reverse mortgage allows you to borrow against your home equity. You can draw down the loan amount as a lump sum, regular income stream, line of credit or a combination. The interest can either be fixed or variable. To understand the current rates, you can check the lender’s website.

No repayments are required as long as you live in the home. If you sell it or move to a senior living facility, the loan must be repaid in full. In some cases, this can also happen after you have died. Generally, the interest rates for reverse mortgages are higher than regular mortgage loans.

The interest is added to the loan amount and it is compounded. It means you’ll pay interest on the interest you accrue. Therefore, the longer you have the loan, the higher is the interest and the amount you’ll have to repay.

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 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).

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.

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.

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.

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 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 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*

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.