As competition among Australia’s big banks heats up, Westpac has made a bold move to attract homeowners by slashing its variable and fixed home loan rates. With the Reserve Bank of Australia (RBA) expected to cut the cash rate soon, the banking sector is preparing for a fierce battle to retain and attract customers. Here’s what you need to know about the latest changes and how they could impact borrowers.
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Westpac Adjusts Variable Home Loan Rates Amid Competitive Pressure
Westpac, Australia’s second-largest home loan lender, has revised its variable interest rates just days after tweaking its fixed-rate loans. Previously, Westpac offered a variable rate of 6.44% for the first two years, followed by a 40-basis-point hike to 6.84%. However, in a bid to make its loans more attractive, the bank has now scrapped the rate increase after two years, effectively maintaining the 6.44% rate for the duration of the loan.
This move signals that banks are gearing up for stronger competition in the mortgage sector, particularly in anticipation of an RBA cash rate cut.
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RBA’s Expected Rate Cut Could Trigger a Mortgage Rate War
With the RBA meeting scheduled for February 17-18, experts predict a 25-basis-point reduction in the official cash rate from 4.35% to 4.10%. Sally Tindall, Canstar’s data insights director, suggests that the first RBA cut could ignite a refinancing boom, pushing banks to lower their rates even further to capture more customers.
“The big banks will almost certainly pass the first RBA cut in full to their variable rate borrowers. However, we could see some lenders cutting new customer variable rates even further to capitalize on what could become a refinancing revival,” Tindall said.
ANZ Holds the Edge with the Lowest Advertised Variable Rate
Among the big four banks, ANZ currently offers the lowest advertised variable rate at 6.09%, though it is only available to refinancers who apply via the ANZ Plus app. While Westpac’s changes enhance its competitiveness, borrowers may still need to shop around to find the best deal.
Despite banks making attractive offers for new customers, existing customers are urged to proactively negotiate their rates, as lenders typically do not automatically apply the best available rates to their existing borrowers.
Westpac Lowers Fixed Home Loan Rates to Stay Competitive
Beyond variable rates, Westpac has also adjusted its fixed-rate loans, cutting fixed rates for owner-occupiers by 0.40 percentage points and reducing investor loan rates by 0.35 percentage points. These reductions place Westpac in a strong position among the big four banks.
- New Westpac Fixed Rate Offers:
- 5.59% for a two-year fixed-term (owner-occupiers paying principal and interest with a 30% deposit).
- This makes Westpac the most competitive fixed-rate lender among the major banks.
- How It Compares to Other Banks:
- NAB reduced owner-occupier fixed rates by 0.25 percentage points and investor rates by 0.30 percentage points two weeks ago.
- NAB’s lowest fixed rate now sits at 5.84% for a three-year term with a 20% deposit.
Westpac’s Quarterly Earnings Decline, but the Bank Remains Profitable
Despite its aggressive rate cuts, Westpac shares have taken a hit, trading down over 5% to $32.79 following the announcement of its quarterly results. The bank reported a 9% decline in net profits for the first quarter of the financial year but still posted a strong $1.7 billion profit.
What This Means for Borrowers
- Lower Interest Rates: Westpac’s adjustments offer borrowers an opportunity to secure more competitive mortgage rates.
- Refinancing Advantage: With an RBA rate cut looming, homeowners should compare their rates and consider refinancing to benefit from better deals.
- Existing Customers Must Take Action: Unlike new borrowers, existing customers won’t automatically receive the best rates, making it essential to negotiate with their lenders.
With mortgage rates continuing to fluctuate and competition intensifying, Australian borrowers should stay vigilant, compare rates, and take advantage of favorable lending conditions.
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