Westpac slashes rates on some loans ahead of the spring property season

Westpac is cutting mortgage interest rates by up to 85 basis points and waiving fees on other products in time for the peak property season in spring. 

The country’s second largest mortgage lender, is also cutting rates on some of the higher risk interest-only loans, despite revealing recently that its proportion of such loans was above regulatory benchmarks.

Traditionally, the first weekend of spring sales is the most buoyant period for residential buyers and sellers and other lenders are expected to follow suit with rate cuts and promotional offers.

Most offers by Westpac are for new loans only.

The group, which also includes Bank of Melbourne, St George and BankSA, is reducing interest-only fixed rates across one to five-years terms by up to 40 basis points. The new three-year residential investment fixed rate will be 4.64 per cent, according to The Australian Financial Review. 

Another residential investment loan promotion takes 85 basis points off the existing rate to 4.89 per cent.

New four-year owner occupier interest-only rates will be cut by 35 basis points to 4.79 per cent.

Establishment fees are being waived for loans of more than $150,000 for the new offers but the $100 establishment fee still applies, the AFR said.

Earlier this week, the group introduced measures to tighten lending criteria by increasing scrutiny of borrowers' income in response to regulatory pressures.

Even National Australia Bank is tightening its rules for home loan applicants, with photo IDs and supporting documents in response to more regulatory scrutiny of lending practices by banks.

Competition in the home loan market is heating up ahead of spring property season with new research by the mobile website Mozo revealing 23 lenders have dropped owner occupier rates since July 1. 

The comparison site found the average rate cut is 15 basis points, while a handful of lenders have cut by more than double that, despite the Reserve Bank keeping the official cash rate on hold since August 2016. 

"There is an unusually high level of competition in the home loan market this year,” says Mozo director Kirsty Lamont. 

“Competition from smaller banks and non bank lenders in the sub 4 per cent end of the market is red hot with 66 lenders now offering variable rates below the 4 per cent mark.”

Mozo found the most competitive variable rate in the market for a $300,000 owner occupier loan is 3.44%, which is 120 basis points lower than the average Big 4 bank variable rate.

“The difference between the big banks’ rates and the lowest on the market adds up to $2,496 a year for the average borrower on a $300,000 loan,” says Lamont.