Rate cuts continue as Heritage Bank pass on 20 basis point cut
Heritage Bank are the latest to announce they are cutting rates following the RBA's decision earlier in the month to cut for the first time since August 2016.
Heritage Bank haven't passed on the full rate cut, deciding to cut its variable home loan rates by 20 basis points.
Their Discount Variable home loan rate is now 3.57%, down from 3.77%.
Peter Lock, CEO of Heritage Bank, says the rates remained among the sharpest available in the market place.
He said Heritage had considered the best interests of all its customers, investors as well as borrowers, in coming to the decision.
“We have to think about both depositors and borrowers when we make these decisions.
“A 0.20% reduction in variable rates means our rates remain highly competitive, and strikes the right balance for us and our customers.”
Lock said Heritage’s customer-owned status meant it did not have the deep pockets of the big banks.
“We don’t set out to make massive profits, so our margins are lower than the big banks. In addition the big banks have a funding cost advantage that smaller customer-owned banks don’t enjoy. We continue to actively work with the Government to address this imbalance.
“Despite the imbalance we still have home loan interest rates that as a whole remain lower than those offered by the big banks.”
“We always make decisions to balance the best interests of all our customers at heart, not to maximise profit, so our rates stayed lower through that period.”
Of the big four banks, Commonwealth Bank and NAB both passed on the full rate cute, while ANZ passed on 18 basis points and Westpac passed on 20 basis points.
Demand for fixed loans rising
Despite the declining variable rates across the majority of banks and lenders, it was demand for fixed rate home loans that rose in May.
According to new data from Mortgage Choice, fixed rate home loans rose over May, accounting for 22.47% of all home loans written.
Mortgage Choice CEO Susan Mitchell said over the last 12 months, fixed rates have accounted for 21.81% of all loans written.
"When you consider what has been happening in the market, the increase in demand is hardly surprising," Mitchell said.
“Lenders on our panel have been aggressively discounting fixed rate home loan products, which has been effective in enticing more borrowers to commit to a fixed term.
“With rates as low as 3.49% p.a*., it’s unsurprising to see an increasing proportion of borrowers choosing to fix.”
The data revealed that fixed rate demand was highest in Queensland, where 26% of borrowers opted for this type of home loan.
This was followed by Western Australia, where 25% of borrowers chose to fix the interest rate on their home loan. Borrowers in Victoria were the least likely to fix, with 15% of borrowers choosing this type of product.
The most popular home loan products in May were ongoing discount Variable Rate loans followed by Basic Variable rates.
“For those borrowers who may be considering fixing part or all of their home loan, now could be a good time to do so," Mitchell said.
"Current fixed-rate loan pricing presents good value by long-term standards.
Mitchell suggested it is good new in particular for first home buyers who are looking to take advantage of government schemes and record low interest rates to enter the property market.
“While news of low interest rates is certainly going to pique borrower interest, it’s equally important that borrowers remember the interest rate isn’t the only component of a home loan and they should look for the right loan product and features for their short and long-term needs."
