NAB and Westpac meet CBA's rate cut
Yesterday, the Commonwealth Bank cut its five-year fixed mortgage rate by 70 basis points to 4.99%, prompting cuts from competitors NAB and Westpac.
It's a record low for the bank. As Jonathan Chancellor reports, Westpac and NAB matched the Commonwealth Bank's rate within a few hours.
Westpac's 0.80% cut only comes into effect on July 28. Their offer includes a discount of 0.2% under the bank's Premier Advantage Package. It will be available to both new and existing customers for a limited time.
NAB dropped its five-year fixed rate by 70 basis points, matching the Commonwealth Bank's 4.99% rate. The new rate will be available from tomorrow. It also cut rates on its three and four-year fixed rate home loans, with a 4.99% rate for its four-year product and 4.94% rate for its three year fixed rate loan.
ANZ is the only of the "big four" banks to hold the interest rate on its five-year fixed rate loan after yesterday's Consumer Price Index figures were released. Its offers a 5.94% rate on the product.
Michelle Hutchison of rate comparison website Finder.com.au says those worried about potential interest rate rises should consider adopting a fixed loan while rate remain competitive.
"Long-term fixed rates such as five-year terms are riskier than shorter terms for one or two years because you have potentially more to lose because you're betting over a longer period of time," said Hutchison. However, she warns borrowers against taking up a loan purely because of a low interest rate.
"It's great to see the big banks dropping their rates and being more competitive but borrowers need to look into all the conditions and details before jumping into a fixed home loan. For instance, Commonwealth Bank's five-year fixed rate of 4.99% must be taken out in their packaged deal which means it has an annual fee and you need to open other accounts with the bank too," she says.
"The problem with fixing your home loan right now is that there's a chance more lenders will follow the major banks' lead and drop their five-year fixed rates even further so borrowers could miss out on even bigger savings.
"Borrowers are also betting on their fixed rate staying below variable rates for most of the next five years. But fixing brings reassurance that your mortgage repayments won't move which can be worthwhile if you're budget is tight or you're planning to have a reduced income for starting a family or going overseas in the next few years," Hutchison explains.
