Rate Cuts

Fourteen lenders have hiked their four-year fixed rates in the wake of CBA&rsquo;s controversial rate hike a month ago today.

By contrast, just 1 lender has cut its 4-year rate in this time, a sign that four-year fixed rates might not be at record lows for much longer.

RateCity.com.au research director, Sally Tindall, said record low four-year fixed rates might not be around for much longer.

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&ldquo;With the RBA&rsquo;s term funding facility now in its final stretch and the next cash rate hike firming up for early 2024, if not before, the writing is on the wall for ultra-low four- and five-year fixed rate loans,&rdquo; she said.

&ldquo;So far Australia&rsquo;s second largest bank, Westpac, has kept its four-year fixed loan at a record low of 1.89 per cent, but it&rsquo;s hard to see this rate sticking around for long.&quot;

&ldquo;The idea of paying under 2 per cent interest until 2025 is an incredibly attractive proposition for many homeowners, but that doesn&rsquo;t automatically make it a good idea. Take the time to work out what type of loan suits your finances.&quot;

&ldquo;Fixed loans come with extra restrictions such as caps on extra repayments, typically no offset account and break fees if you want to get out early.&quot;

&ldquo;One option is to split your loan so it is part fixed and part variable, which typically lets you make extra repayments on the variable portion.&quot;

&ldquo;Money might be cheap now but in a few years&rsquo; time it&rsquo;s likely to be a very different story, provided the economic recovery stays on track, particularly for anyone coming off a fixed rate,&rdquo; she said.

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Rates on the rise following CBA's hike last month

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ANZ has today revealed it is cutting its variable package rates for new borrowers by between 0.35% and 0.90%, bringing its package rates into line for all loan amounts.  

Canstar’s research shows the average variable package rate from the major banks is 3.43% and ANZ now offers the lowest of the major banks’ variable package rate offers for owner occupiers at 2.99% (3.42% comparison rate).

The changes for owner occupiers paying principal and interest (80% LVR) are as follows: 

<img alt="" height="231" src="https://s3-ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/pictures/article-images/anz_rate_cut.jpg" width="741">

Canstar Group Executive, Financial Services, Steve Mickenbecker says “Today’s cut from ANZ is the first cut to a variable rate by one of the big four banks since September last year, as interest rate cuts have since been focused on fixed rates.”

“The decrease from ANZ is being passed on to new borrowers by way of increasing the discount applied to its standard variable rate and will not be passed on to existing borrowers. "

“ANZ now offers the lowest package rate among the major banks and it would not be surprising to see others moving down the same path."

[smartcode_project:default project_id=4939]

“ANZ is seeking to grow its share of low risk business, with the gap between lending to borrowers with equity below 20 per cent and those with greater equity widening from 5 to 20 basis points," he concluded.
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ANZ has today revealed it is cutting its variable package rates for new borrowers by between 0.35% and 0.90%

ANZ cuts variable rates by up to 0.9%

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As of today, NAB cut various fixed, investment, interest-only and package home loans by up to 15 basis points. 

The lowest rate among the affected loans is 1.89% p.a, belonging to the Choice Package Tailored Fixed loan for two years, paying principal and interest.

Another NAB loan cut to the sub 2% mark is the Tailored Fixed loan for two years (P&amp;I), with an advertised rate of 1.99% p.a (4.20% p.a. comparison rate). 

Other rate cuts are as follows:

<ul>
<li>NAB Inv Tailored Fixed - IO in arrears 2 yrs: 10 basis point cut to 2.59% p.a (4.87% p.a. comparison rate*)</li>
	<li>NAB Inv Tailored Fixed  - P&amp;I 2yrs: 15 basis point cut to 2.39% p.a (4.75% p.a. comparison rate)</li>
	<li>NAB Choice Package Inv Tailored Fixed - IO in arrears 2 yrs: 10 basis point cut to 2.49% p.a (4.60% p.a. comparison rate*)</li>
	<li>NAB Choice Package Inv Tailored Fixed - P&amp;I 2 yrs: 15 basis point cut to 2.29% p.a (4.51% p.a. comparison rate*)</li>
</ul>
These cuts by NAB follow a plethora of recent rate cuts, many of which were made to two year fixed loans.

In recent months, fellow big four banks Westpac and Commonwealth Bank had each cut at least one home loan rate to below 2% p.a - only ANZ is yet to do so. 

Recently Homestar Finance cut out the competition  offering the lowest two-year fixed interest rate in history at just 1.74% with its variable rate also the lowest at just 1.79%:

<h2>Residences where buyers could benefit from the cuts:</h2>

[smartcode_project:default project_id=600]

[smartcode_project:default project_id=29935]

[smartcode_project:default project_id=6201]
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In recent months, fellow big four banks Westpac and Commonwealth Bank had each cut at least one home loan rate to below 2% p.a with only ANZ still yet to do so

NAB drops some fixed home rates to sub 2%

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NAB has today announced cuts to fixed home loan rates with decreases of up to -0.55% for owner occupied and up to -0.15% for investment loans.

Today’s cuts position NAB’s owner occupier 3-year fixed principal and interest package rate of 1.98% (3.83% comparison rate) ahead of the other major banks’ rates for the same term.

Canstar analysis reveals that moving from the average variable rate of 3.28% to a 3-year fixed rate of 1.98% could see an owner occupier paying principal and interest on a $400,000 home loan slash their repayments by $273 each month or $9,828 over three years. However, moving to the lowest 3-year fixed rate in the market of 1.75% (comparison rate 2.22%) from NAB’s subsidiary bank, Ubank would cut repayments by $318 per month. 

<img alt="" height="502" src="https://s3-ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/pictures/article-images/nab_rates_2021_1.jpg" width="680">

Canstar Group Executive, Financial Services, Steve Mickenbecker says the move shows NAB is competing for new business by taking advantage of low cost funding.

“Interest rates continue on their downward path for homeowners and investors. NAB’s 11 basis point cut to its three year fixed rate for homeowners means that it has undercut the rates of competitors to deliver the lowest interest rate of the major banks for this popular fixed term.”

“Low cost funding has made fixed rates the playground for the big banks and while the Reserve Bank term funding facility remains available, the great deals should stay strong. Mid-year could see a small upward adjustment when the term funding is expected to be fully allocated and expire."

“It’s a great time to be thinking about fixing a rate when you can lock in for three or four years with an interest rate below 2%. Today’s move from NAB suggests competition at the low interest rate end of the market will be with us for a little longer,” Mr Mickenbecker concluded.

<img alt="" height="502" src="https://s3-ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/pictures/article-images/nab_rates_2021_2.jpg" width="683">

<h2>Properties you may like:</h2>

[smartcode_project:default project_id=22700]

[smartcode_project:default project_id=2807]
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Today’s cuts position NAB’s owner occupier 3-year fixed principal and interest package rate of 1.98% ahead of the other major banks’ rates for the same term

NAB cuts fixed rates by up to -0.55%

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The ANZ tips there will be RBA rate cuts in May and August this year.
They have noted their expectation for a weakening property market too, in their latest February 2016 ANZ heatmap.
<a href="/images/2016/01/18/Screen%20Shot%202016-01-18%20at%2010.38.06%20AM.png" target="_blank">Click to end</a><img src="/images/2016/01/18/Screen%20Shot%202016-01-18%20at%2010.38.06%20AM.png" alt="">
ANZ's heatmap published in February last year (below) predicted a cash rate of <a href="/expert-insights/finance/39841-rba-2-cash-rate-forecast-the-anz-heatmap" target="_blank">2% for December 2015</a>.
<a href="/images/2016/01/18/anz-feb-2.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/01/18/anz-feb-2.jpg" alt="">
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ANZ heatmap tips RBA rate cuts in May and August 2016

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In April there were 81 cuts to variable interest rates for homeowners, and 71 for investors, a clear sign of the competition heating up, according to Canstar.com.au.
For homeowners, variable rates were cut by an average of -0.20% for those paying principal and interest and -0.30% for those paying interest only, while for investors, the average cut was -0.21% for both principal and interest and interest only.
By swapping from the average variable rate of 3.49% to the lowest variable rate in the market (2.39% with a loan to property value ratio of 80%) mortgage holders can reduce their monthly repayments by $236.
Likewise, by moving from the average 3-year fixed rate of 2.68% to the lowest rate of 2.09% borrowers can pocket an extra $122 every month.
Canstar home loan expert, Steve Mickenbecker says, “with rates as low as 2.09%, you should be looking to lower your loan costs to put more money in your pocket each month or allow you to pay off the loan faster.”
“Even the big guys have come to the party, with one of the major banks offering a 2-year fixed rate at 2.19% and all of the major banks offering 3-year fixed rates down to 2.29%."
“With restrictions in some states lifting on open houses and auctions, the record low interest rates might now encourage buyers back into the market. Buyers should be bargain hunting for the right loan, not just the right property.”
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j.ballantyne1990-6AQqhLzZaK

152 rate cuts across financial institutions in April: Canstar

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EXPERT OBSERVER
In a speech yesterday the Deputy Governor of the Reserve Bank gave a fairly clear hint that the Board is set to cut the cash rate and other key policy rates at its October Board meeting.
The Bank is also likely to extend its objectives for bond purchases to include general support for the Australian and semi government yield curves in the five to ten year maturity range. It is likely to leave this commitment open ended at this stage.
We have discussed these issues in previous notes but did not expect the action as soon as the next Board meeting as now seems to be the case.
The theme is likely to be, as we saw in March, a Team Australia moment where the Reserve Bank is directly supporting a bold Federal Budget.
The prospect of the RBA “sitting back” to assess the Budget, which has been seen as the “norm” in previous years is not appropriate for these unique times.
We now expect the RBA to cut the overnight cash rate to 10 basis points; to adopt a 10 basis point three year bond target; and to adjust the rate on any new drawdowns of the Term Funding Facility to 10 basis points. All these rates are currently set at 25 basis points , which the Governor has generally described as the effective lower bound for the cash rate.
The Bank is also likely to reduce the rate which the Bank pays on Exchange Settlement Account balances from 10 basis points to 1 basis point.
If the banks are only earning 1 basis point on their ESA balances there will be significant incentive to purchase bonds, even if the bond is only yielding 10 basis points, or lend to the private sector.
BILL EVANS is <a href="https://westpaciq.westpac.com.au/Article/44613/14186/" target="_blank">Westpac's chief economist</a>
 
 
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Westpac now expect RBA to cut in October: Bill Evans

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The combination of strong supply and weak population growth means that the housing market has a period of adjustment ahead of it, Macquarie Reseach has forecast.
It says there are three key paths for adjustment to normalise price to income ratios and supply and demand -  lower house prices, a decline in new dwelling supply (construction) and a cut in interest rates.
Their overall outlook incorporates all three of these factors, though not to the same degree.
<a href="https://www.propertyobserver.com.au/images/2015/10/13/Screen%20Shot%202015-10-13%20at%2010.35.41%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2015/10/13/Screen%20Shot%202015-10-13%20at%2010.35.41%20AM.png" alt="">
 
"Lower prices boost affordability, sustaining house price to income ratios as per dwelling incomes decline,' the Macquarie report advised.
"Reductions in dwelling supply stem the decline in the persons per household ratio, pushing up household incomes.
"And interest rates support nominal house price values."
It noted an important distinction about the cycle over the period ahead is that it does not occur against a backdrop of favourable tailwinds.
"Previous housing construction cycles have been associated with some combination of a credit tailwind (rising debt to income ratio), fiscal expansion/tax cuts, participation boost, or major income boost within the economy (price phase of the mining boom).
<a href="https://www.propertyobserver.com.au/images/2015/10/13/Screen%20Shot%202015-10-13%20at%2010.38.20%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2015/10/13/Screen%20Shot%202015-10-13%20at%2010.38.20%20AM.png" alt="" width="1230" height="643">
"Through previous cycles, policymakers have managed to avoid large negative house price adjustments – with subsequent destructive effects on household, business and bank balance sheets – and instead used policy to support existing prices, with long, slow adjustments occurring over a number of years.
"For example, in real terms, Sydney house prices peaked in 1Q89, but took almost a decade to exceed that level. The nominal price adjustment was minimal, and was recovered 2 years later. But in real terms, the ABS measure of Sydney house did not better the 1Q89 level until 2Q98 (figure 26 and 27).
<a href="https://www.propertyobserver.com.au/images/2015/10/13/Screen%20Shot%202015-10-13%20at%2010.40.59%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2015/10/13/Screen%20Shot%202015-10-13%20at%2010.40.59%20AM.png" alt="" width="1558" height="740">
"We expect a measured 7.5% peak to trough decline in house prices over 2016 and into 2017, with a recovery commencing in 2H17," was the headline takeout of the report.
It especially noted Australia’s population growth has slowed and was on track to slow further over the coming quarters.
It concluded while the population growth was still positive, but not as strong as it used to be, that it was not strong enough to justify the major surge in housing supply that will hit the market over the course of 2016.
"Slower population growth adds to the adjustment challenge within the housing market over 2016 as the upswing in supply converges with the impacts of macro prudential policy tools and curbs on foreign investors.
"Building approvals and housing commencements, at 200k+ are running well ahead of estimates underlying demand, which we peg at 170-180k once current, and prospective, population growth rates are incorporated. 
"Supply has undershot demand for several years.
"Whilst Australia’s population growth has slowed to a 9-year low, and is on track to moderate further, residential dwelling supply is reaching all new records.
"Building approvals are currently running at an annual pace of 225k, and commencements are following through.
"Both are at new records (figures 8 &amp; 9 below).
<a href="https://www.propertyobserver.com.au/images/2015/10/13/Screen%20Shot%202015-10-13%20at%2010.48.11%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2015/10/13/Screen%20Shot%202015-10-13%20at%2010.48.11%20AM.png" alt="">
"The full impact on dwelling supply is yet to be felt in the physical market.
"Completions have risen substantially, but they lag commencements, and there is a record 180k dwellings currently under construction (figure 10 above).
"Subsequent pent up demand has been calibrated into prices, through increases in persons, employment, and income per household.
"Unleashing that pent up demand will also have price effects – it will require an improvement in affordability.
"Improving affordability requires either lower house prices, lower interest rates, or stronger household income growth.
"In the absence of robust wage and income growth in the economy, achieving the latter will be more difficult the longer that strong dwelling supply persists."
Macquarie expect a retrenchment in housing commencements through 2016 and into 2017, concentrated in the high density apartment segment.
"This is likely to be accompanied by weaker dwelling prices, as the market struggles to absorb the currently bulging supply pipeline.
"Depending on the speed of adjustment, lower rates may be needed to support demand and prices. 
"We remain of the view that further monetary policy easing is likely from the RBA. 
"Our base case is that this is delivered in November, alongside downgraded forecasts for growth and inflation.
"We have maintained the view for some time that the risks lie with additional easing in 2016.
"How swiftly the currency falls to a level sufficient to catalyse the transition from mining to non-mining growth is a key driver of the outlook for rates in 2016.
"An earlier, or more rapid, housing construction adjustment – which we expect to accelerate from 2H16 – could mean more cuts will be needed."
<a href="https://www.propertyobserver.com.au/images/2015/10/13/Screen%20Shot%202015-10-13%20at%2010.42.32%20AM.png" target="_blank" style="line-height: 1.3em;">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2015/10/13/Screen%20Shot%202015-10-13%20at%2010.42.32%20AM.png" alt="">
 
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November rate cut - and 7.5% house price drop starting in 2016: Macquarie Research

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Challenger banks are leading the response to the RBA’s second rate cut this year with Bank Australia and Bank of Sydney to pass on the full 25 basis point rate cut as the Big 4 hold back up to 15 basis points, says Mozo.com.au.
The financial comparison site says the big banks are also delaying interest rate relief to borrowers by up to 3 weeks, while Bank Australia’s generous cut will be passed on this Friday.
“The Big 4 are set to pocket a whopping $1.6 billion by denying loyal borrowers up to 15 basis points in rate relief and delaying passing on their miserly cuts by up to 20 days,” says Mozo Director Kirsty Lamont.
“At the same time, we’ve already seen two challenger banks announce they will pass on the rate cut in full and Bank Australia’s customers will get their rate relief a full week before the first big bank delivers on its stingy rate cut.”
“The third rate cut in under 18 months is great news for Aussie home borrowers and we are hoping to see a race to rock-bottom rates by challenger banks eager to snatch business away from the big banks,” says Lamont. 
All four of the big banks have announced they will cut variable home loan rates, withholding around half of yesterday’s 25 basis point RBA cut.
NAB, ANZ, CBA and Westpac have confirmed they will pass on just 10, 12, 13 and 14 basis points respectively, in August.
Bank Australia announced it would pass on the full 25 basis points, opening the door for big cuts by other smaller lenders.
<a href="https://mozo.com.au/home-loans/variable-rate" target="_blank">Mozo</a> have Mortgage House as having the lowest variable rate. Borrowers can compare 478 home loans online using Mozo’s Home Loan comparison tool.
Data insights director at RateCity.com.au Peter Arnold said variable mortgage holders were carefully watching the banks’ moves.
“The major banks’ decisions are disappointing, and it means that around 80 per cent of all variable home loan customers will miss out on some of the savings,” he said.
“The fact that all of the Big Four banks have decided to pass on just half yesterday’s RBA cut isn’t surprising and proves shareholders are their number one priority now.
“But the good news for borrowers is that there’s a home loan rate war going on and plenty of lenders will be passing on the cut in full and are actively hunting for new customers with low rates.
“There are plenty of lenders already offering rates below 4 per cent for owner-occupiers, so if you’re on a rate above 4.5 per cent, the chances are you’ll still be behind, even if you do get a cut.”
“Not all lenders passed on the full 0.25 percentage point saving after the May rate cut, with just 0.18 percentage points making its way to customers on average, leaving borrowers $183 million out of pocket,” he said.
<a href="/images/2016/08/03/Screen%20Shot%202016-08-03%20at%2012.53.48%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/08/03/Screen%20Shot%202016-08-03%20at%2012.53.48%20PM.png" alt="">
Source: Rate City calculations based on a 30-year home loan at the average SV rate of 4.71 percent.
 
 
 
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RBA rate cut update: Which banks have moved?

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Home loan rates continue to drop with close to 200 cuts in the past month.
A new analysis by <a href="https://www.ratecity.com.au/" target="_blank">RateCity.com.au</a> shows 106 variable rate home loan rates have been cut by 0.17 percentage points on average since September 1.
Fixed rates have also dropped in that time, with 74 rates cut by an average of 0.23 percentage points.
Peter Arnold, data insights director at RateCity.com.au, said a huge portion of rates on offer are now under the 4 per cent mark and further cuts are imminent. 
“The cash rate is on hold yet we are still getting home loan cuts as there is so much competition to get new customers and we don’t expect that to change in the near future,” he said.
“There are now 834 home loans with rates under 4 per cent with ongoing variable rates as low as 3.35 per cent, and three-year fixed rates starting from 3.59 per cent.”
RateCity calculations shows that while a typical RBA rate cut of 0.25 per cent frees up $45 a month on a typical $300,000 home loan, switching from the average standard variable rate of 4.62 per cent to one of the lowest available could save borrowers $220 per month.
Arnold said the fact that rates were on hold this month could make buyers complacent when it comes to finding a home loan.
“If you’ve been sitting on a rate it’s as good a time as ever to get a good deal as there’s a lot of the banks fighting hard for customers.”
“Whether it’s variable, or fixed, rates are at historic lows and buyers will end up ahead if they make the most of the competition in the marketplace,” he said.
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Rate Cuts

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