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No move expected from the RBA, but banks keep chipping away at variable rates

No move expected from the RBA, but banks keep chipping away at variable rates

Variable rates continue to fall, with 27 lenders cutting at least one variable rate in the last month.

This is despite the RBA keeping the cash rate on hold for almost 12 months and no move expected until at least 2024.

Rate changes in the last month: lenders that have moved at least one rate

Lenders that have cutLenders that have hiked
Variable271
1 year Fixed71
2 year Fixed60
3 year Fixed310
4 year Fixed09
5 year Fixed29

Source: RateCity.com.au. Data is from 4 September to 3 October 2021 inclusive.

Analysis from RateCity.com.au shows while the majority of rates under 2 per cent are fixed, there are now 48 variable home loan rates also under 2 per cent.

Number of home loan rates under 2%

CategoryNumber of rates under 2%Current lowest rate
Variable481.77%
1-year fixed471.59%
2-year fixed791.59%
3-year fixed311.79%
4-year fixed02.15%
5-year fixed02.27%

Source: RateCity.com.au.

RateCity.com.au research director, Sally Tindall, said the majority of cuts in the last month were to variable rates.

“Banks largely left fixed rates alone last month, opting for a ‘wait and see’ approach as they work out what impact Australia’s COVID recovery plan will have on the economy,” she said.

“However, this hasn’t stopped many lenders from taking the scissors to their more malleable variable rates, which were lagging well behind fixed rates.

“When the RBA cut the cash rate last November there were just six variable rates under 2 per cent. Today there are 48, including five investor rates.

“After the last two cash rate cuts, variable rates barely moved as most lenders opted to drop fixed rates instead. If anything, these cuts are overdue,” she said.

While the value of new home loans dropped slightly in August, refinancing hit a record high of $17.78 billion.

“Locked-down Australians might not have been able to hit the stores over the last couple of months, but they have used the time to take their home loan shopping,” she said.

“This refinancing renaissance is great news. Each month tens of thousands of households are now saving more on their mortgage, but also collectively it puts pressure on lenders to keep their rates competitive.

“In recent months almost $50 billion worth of residential mortgages has been up for grabs. This might seem like a gigantic pot, but with over 120 lenders on the market, and hordes of borrowers with itchy feet, the competition is intense,” she said.

Lowest rates on the RateCity.com.au database

LenderRate
1 yr fixedGreater Bank, Bank of Us

1.59%

2 yr fixedGreater Bank

1.59%

3 yr fixedCommunity First Credit Union

1.79%

4 yr fixedIllawarra Credit Union

2.15%

5 yr fixedFreedom Lend

2.27%

VariableReduce Home Loans

1.77%

Source: RateCity.com.au Note: Rates are for owner-occupiers paying principal and interest. Some LVR requirements apply. Greater Bank is only available for properties in NSW, Qld and ACT. Bank of Us is only available to Tasmanian residents.

Lowest big four bank owner-occupier home loan rates

CBAWestpac*NAB ANZ
1 yr fixed

2.09%

1.99%

2.09% 

2.04%

2 yr fixed

1.99%

1.89%

1.99%

1.94%

3 yr fixed

2.19%

1.98%

2.18%

2.04%

4 yr fixed

2.29%

2.49%

2.49%

2.49%

5 yr fixed

2.99%

2.79%

2.79%

2.69%

Variable

2.69%

1.99% for 2 yrs then 2.49%

2.69%

2.72%

Source: RateCity.com.au. *Note: Westpac's rates are for a loan to value ratio of up to 70%.

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This article was reviewed by Research Director Sally Tindall before it was published as part of RateCity's Fact Check process.

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