Mortgage minnows show up major banks on rate cuts
As the stand-off between the big banks and their borrowers enters an unprecedented second day, credit unions and mortgage minnows have shown up their bigger rivals by passing on most of the November 6 rate cut.
BMC Mortgage, Collins Home Loans, Credit Union SA, Hemisphere Financial, Police and Nurses Mutual Banking, The Capricornian and Unicredit WA have all passed on at least 16-basis-point reductions to customers, according to RateCity.com.au.
Lenders that have cut rates
Lender | Product | New rate | Cut by |
BMC Mortgage | Platinum Pack | 6.85% | -0.25% |
BMC Mortgage | Advantedge | 6.93% | -0.25% |
Collins Home Loans | Premium Variable | 6.79% | -0.20% |
Collins Home Loans | Variable | 6.47% | -0.25% |
Collins Home Loans | First Home Buyer | 7.46% | -0.25% |
Collins Home Loans | Go Between Loan | 6.79% | -0.16% |
Credit Union SA | First Home Loan | 6.92% | -0.20% |
Credit Union SA | Standard Variable | 7.22% | -0.20% |
Credit Union SA | Standard Variable Unlimited | 6.92% | -0.20% |
Hemisphere Financial | Contour Loan | 7.44% | -0.25% |
Hemisphere Financial | Home Loan | 7.04% | -0.25% |
Hemisphere Financial | Horizon Loan | 6.69% | -0.25% |
Hemisphere Financial | Quickstart Loan | 7.34% | -0.25% |
Police&NursesMut | Easypay Variable | 7.03% | -0.25% |
Police&NursesMut | Dream Home Loan Var | 6.74% | -0.25% |
Police&NursesMut | Life Style Home Loan | 7.09% | -0.25% |
The Capricornian | Variable | 7.60% | -0.25% |
The Capricornian | My Advantage | 7.10% | -0.25% |
The Capricornian | My First Home Loan | 6.70% | -0.65% |
Unicredit-WA | Variable | 6.85% | -0.25% |
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They join Bank of Queensland, ME Bank and Heritage Bank (all of whom have passed on the rate cut in full) to announce their interest rate decisions.
The mortgage comparison website calculates that just 6% of more than 110 lenders on its site have announced that they will pass on at least part of the Reserve Bank's 0.25% reduction to mortgage customers (as of December 7).
It expects the majority of lenders to move over the coming weeks as they did in November.
Alongside the Big Four banks and their subsidiary brands ING Direct and Citibank have yet to make any announcement about rate cuts following the RBA cutting the cash rate by 25 basis points on December 6.
Damian Smith, RateCity's CEO, says switching to another lender may be more cost-effective than many borrowers realise.
"If your lender doesn't move on rates this month and you end up with a rate over 7% by January, then switching to a another lender may see you in front financially in less than one year," he says.
The average upfront fee when switching to a new home loan is $535 for home loans in the RateCity database. Some lenders may also be required to pay an exit fee if they signed up to their existing loan before July 1.
"For a borrower with a $400,000 home loan and paying the average of the big four bank's standard variable rates of 7.55% would need to switch to a new rate of 7.38% (0.17% less) to recoup the costs of switching within the first 12 months.
"Borrowers currently paying a rate of 7.1% would need to switch to a rate of 6.93% to recoup the costs of switching in the first year.
"There is really no need to stick with your current lender if they aren't willing to budge on interest rates or they aren't one of the most competitive on the market,” Smith says.