Home loan rates guide: What's now on offer and what you should be considering after the historic RBA cash rate cut
The dust has almost settled following the RBA’s decision to cut the cash rate by 25 basis points to a 53-year-low of 2.75%.
Reflecting better funding conditions, the Greater Building Society was the standout lender, passing on 30 basis points to borrowers followed by ANZ which passed on 27 basis points, saving borrowers between $50 and $60 per month for those on a $300,000 variable-rate mortgage.
Nearly all lenders diligently passed on the 25 basis points in full, but from different starting points so even if your lender has passed on the rate cut in full, your new home loan rate may not look that attractive.
Westpac chief economist Bill Evans has also highlighted that while the cash rate may be at a record low of 2.75%, the average standard variable rate is someway off the 2009 low of 5.75% with lenders increasing their margins since the GFC by not passing on rate cuts in full and in some cases, lifted rates independently of the RBA.
RateCity.com.au CEO Alex Parson highlights that prior to the Tuesday rate cut, the benchmark standard variable rate was 6.42%.
“While this is the lowest level since December 2009, it is still 3.42 percentage points above the cash rate and the biggest spread we’ve ever seen,” Parson says.
There's also a big spread in the standard variable mortgage offerings - the benchmark at which all lenders price their home loans - as this table shows, starting from 4.75% and rising to 6.22%:
Lenders that passed on more than 0.25% | ||
Company | Standard variable rate movement | New standard variable rate |
Greater Building Society | -0.30% | 5.75% |
ANZ | -0.27% | 6.13% |
Lenders that passed on the full 0.25% cut | ||
Adelaide Bank | -0.25% | 5.56% |
Aussie Home Loans | -0.25% | 5.24% |
Bank MECU | -0.25% | 5.74% |
Bank of Melbourne | -0.25% | 6.15% |
Bank SA | -0.25% | 6.22% |
Bankwest | -0.25% | 6.14% |
BOQ | -0.25% | 6.26% |
Commonwealth Bank | -0.25% | 6.15% |
CUA | -0.25% | 5.60% |
Heritage Bank | -0.25% | 5.89% |
IMB | -0.25% | 5.91% |
ING DIRECT | -0.25% | 5.41% |
loans.com.au | -0.25% | 4.87% |
MyRate | -0.25% | 5.42% |
nab | -0.25% | 6.13% |
P&N Bank | -0.25% | 5.95% |
People’s Choice Credit Union | -0.25% | 6.12% |
Police Credit | -0.25% | 5.74% |
St George Bank | -0.25% | 6.24% |
Suncorp Bank | -0.25% | 6.24% |
State Custodians | -0.25% | 5.09% |
UBank | -0.25% | 4.87% |
Westpac | -0.25% | 6.26% |
Yellow Brick Road | -0.25% | 6.15% |
Lenders that passed on less than 0.25% | ||
Community First Credit Union | -0.22% | 6.12% |
loans.com.au* | -0.24% | 4.75% |
Police Bank | -0.20% | 5.84% |
Source: RateCity.com.au, ranked by biggest cuts then alphabetically, effective dates vary between lenders/ *For new loans.com.au home loan customers
But as highlighted by Bill Evans, the picture is complicated by discount offerings and very low online home loan rate offerings, these often come with high deposit requirements or a minimum home loan size.
Rate cut announcements made by lenders generally mention the new standard variable rate on offer, but most borrowers would receive some sort of discount off this rate if they take out a packaged home loan, borrow a large enough amount or if they qualify for a discounted special.
This may be an introductory rate (sometimes called a honeymoon rate) or a rate for the life-time of the loan (called a discounted home loan rate).
For example, Yellow Brick Road has cut its standard variable rate to 6.15% but is offering a 1.25% discount of the first 12 months of the loan and 86 basis points off the life of the loan after this period.
Credit union CUA passed on the full rate cut, reducing its standard variable rate to 5.6% on May 20 but will also offer a discounted variable rate of 5.17% under its package offering as well as a honeymoon rate of 5.22%.
NAB may have passed on the full rate cut to borrowers to offer a standard variable rate of 6.13% but many borrowers will be on packaged home loan rates with discounts from 50 to 85 basis points.
Some eyebrows though may be raised at NAB’s online offering Ubank, which will offer a discounting refinancing rate of 4.87% when its cheaper online rates kick in on May 17.
Non-bank lender State Custodians has cut its standard variable rate to 5.09%, but will offer its peak performance loan at a very low 4.74%, with a 20% deposit requirement.
A rate cut should rightly spur some borrowers on variable rate loans or those with fixed rate loans (where the term will soon expire) to review their current mortgage and the rate they are paying together with any fees as well as the benefits and perhaps put in a call to their mortgage broker or lending manager.
But certainly you should not rush into a refinancing your home loan until you have a comprehensive understanding of the costs and fees involved, your personal circumstances and long-term objectives and what refinancing will actually mean in terms of paying off your home loan.
Signing up to an eye-catching low rate because the online offer will expire in 10 days is where the expression “only fools rush in” is most apt.
A good starting point is to arm yourself with knowledge.
Download a free copy of the Property Observer ebook: 12 tips for refinancing your mortgage and watch the free Property Observer webinars Refinancing and the interest rates riddle and the The Do's and Don'ts of Refinancing Your Existing Home Loan - and How to Avoid Unnecessary Hurdles.