RBA Governor Philip Lowe told homeowners to shop around if their bank doesn’t follow through on rate cut
Mortgage holders are being urged to shop around for a better home loan deal if their lender doesn’t follow through and cut rates.
This comes after the Reserve Bank of Australia (RBA) cut the official cash rate to an all-time low of 0.10 per cent from an already historic low of 0.25 per cent in this month’s RBA board meeting.
After the announcement on Tuesday, Governor Philip Lowe told homeowners to shop around if their bank doesn’t follow through and cut home loan interest rates.
The best outcome would be for standard variable rates to be lowered but if that doesn’t occur I’m confident there will be pass-through occurring through people renegotiating and switching, Mr Lowe said. I encourage everybody to go to their bank and ask for a better deal, if they don’t give it to you, switch to a bank that will.
Mr Lowe said the interest rate cuts will assist the Australian economy’s recovery by “lowering financing costs for borrowers”.
Commonwealth Bank – country’s largest retail bank – was the first of the big banks to cut their home loan rates.
Westpac has also announced a rate cut, slashing fixed interest rates for home loan customers.
In a statement on Wednesday morning, CBA said its owner occupier four year fixed rate will be reduced by 100 basis points to 1.99 per cent – the lowest fixed rate the bank has ever offered in its 108 year history.
The major bank has also lowered two and three year fixed rates for owner occupier home loans by 15 basis points, both offering rates at 2.14 per cent. One year fixed rates are being advertised at 2.19 per cent.
CBA has not changed the current interest setting on its variable home loan rates.
Meanwhile, some lesser-known smaller lenders have trimmed their variable home loan interest rates, including Athena, homeloans.com.au, Homestar Finance, Pacific Mortgage Group, Reduce Home Loans and Freedom Lend.
Treasurer Josh Frydenberg said the cut is “good news for borrowers” – whether they’re small businesses or households and families with a mortgage.
The Treasurer said he expects the big banks to follow through with rate cuts, even though only one of the big four has followed through.
Homeowners could save thousands of dollars with the rate cut.
For someone with a $400,000 mortgage, the average across the country that is worth $1000 a year for someone with a mortgage that size, Mr Frydenberg said.
That being said, the banks, no doubt, will look for other ways to pass on this lower cost of borrowing for them, whether it’s for small business loans or whether it’s for fixed mortgage rates as well.
Graham Cooke, insights manager at Finder, said the rate cut could mean big savings from lenders who pass on the reduction to customers.
An average mortgage holder could save $15,000 if banks pass on the cut.
For mortgage holders, another rate reduction will be welcome news – even a cut of 15 basis points could save the average home loan customer around $500 a year in interest, he said.
He added that “now is not the time for homeowners to be complacent”.
If your lender doesn’t pass on the savings, it’s time to refinance to a more competitive deal, Mr Cooke said.