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Westpac shuts the door on rates under 2%

Westpac shuts the door on rates under 2%

Westpac has today discontinued its introductory variable rate of 1.99 per cent. The bank now has no rates under 2 per cent.

Westpac’s lowest variable rate was 1.99 per cent for the first 2 years, and 2.49 per cent thereafter. Today, the bank’s lowest Flexi First Option rate is now 2.19 per cent ongoing, for owner-occupiers paying principal and interest with a loan to value ratio (LVR) of up to 70 per cent.

Westpac has not changed its standard variable or package rates.

As a result of the change, NAB is the only big four bank with a rate starting with a ‘1’ – its 1-year fixed rate. However, there are still 30 lenders offering variable rates under 2 per cent.

Today’s changes to the Flexi First Option (basic variable rate)

Loan typeOld rateNew rateChange
LVR under 70%

1.99% for 2yrs then 2.49% ongoing

2.19%

+0.20% first 2yrs,

- 0.30% thereafter

LVR 70% or more

2.09% for 2yrs, then 2.59% ongoing

2.29%

+0.20% first 2yrs,

- 0.30% thereafter

Note: Above rates are for owner-occupiers paying principal and interest.

The change means Westpac has the lowest ongoing variable rate out of its big four competitors, however, it only applies to new customers. Existing customers with this loan will remain on the old rate.

While this rate change means customers will initially pay a higher rate, after two years they will be paying 0.30 per cent less than customers on the previous rate.

RateCity.com.au analysis shows that customers who keep this loan for more than 3 years and 4 months will pay less interest than if they were on the previous rate structure. This is based on an owner-occupier paying principal and interest on a 30-year loan.

Variable rates largely on a downward trend

Analysis of the RateCity.com.au database shows:

  • In the past three months, 60 lenders have cut at least one variable rate, including CBA, ANZ and NAB. Just 10 lenders have hiked variable rates in this time (excluding Westpac).
  • The lowest variable rate is 1.77 per cent from Reduce Home Loans.

RateCity.com.au research director, Sally Tindall, said: “Westpac has shut the door on rates under 2 per cent.”

“Westpac first dropped its lowest variable rate to 1.99 per cent just over three months ago, and while this sub-2 per cent rate was only ever an introductory one, it played a significant role in driving other variable rates down,” she said.

“In the last three months, 60 lenders have cut at least one variable rate as they jostle for business coming from new borrowers and refinancers.

“While the ultra-low introductory rate would have helped attract the attention of new customers, Westpac’s decision to scrap the two-step rate was a wise one. One competitive ongoing rate is easier for customers to understand and compare, not to mention simpler for the bank to execute.

“The average new borrower will initially pay more than customers on the old rate, however, if they’re still on the same loan after 3 years and 4 months they will pay less interest in total,” she said.

Lowest big four bank owner-occupier home loan rates

CBAWestpacNABANZ
Variable

2.29%

2.19%

2.29%

2.29%

1 yr fixed

2.34%

2.24%

1.99%

2.04%

2 yr fixed

2.34%

2.24%

2.34%

2.09%

3 yr fixed

2.69%

2.59%

2.79%

2.44%

4 yr fixed

2.89%

2.89%

2.89%

2.74%

5 yr fixed

3.09%

3.09%

3.09%

2.94%

Source: RateCity.com.au. Note LVR requirements apply for some loans. Westpac’s variable loan is for a loan to value ratio of 70% or less.

Lowest variable rates on the RateCity.com.au database

LenderAdvertised rate
Reduce Home Loans

1.77%

Homestar Finance

1.79%

Pacific Mortgage Group

1.79%

Well Home Loans

1.82%

Freedom Lend

1.84%

Tic:toc Home Loans

1.89%

Source: RateCity.com.au Note: Rates are for owner-occupiers paying principal and interest. Some LVR and location requirements apply. 

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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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