Reserve Bank of Australia’s Governor Michele Bullock faces a tough balancing act ahead. Picture: NewsWire / Christian Gilles
A rate war has broken out as banks go against RBA, with a major lender slotting in a surprise double cut – and 18 others dropping variables.
In aggressive moves since the RBA’s last hike in May, a surprising 18 lenders have cut variable mortgage rates, the Canstar database found.
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About one in five chance of a rate hike in the latest RBA Rate Tracker. Source: ASX
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In its interest rate wrapup, Canstar found AMP Bank went hardest on fixed rates than anyone else in the market – slashing by up to 0.50 percentage points – double the average fixed cut of 0.22 percentage points recorded across five lenders.
The move is a bold bet that the RBA will hold come August 11 – and for the 13 per cent of big bank borrowers with no repayment buffer left, the timing could not be more unnerving.
In the past week, Bendigo cut variables, joining 14 other lenders that now have at least one product below 5.9 per cent.
Bendigo Bank dropped 0.15 percentage points to 5.89 per cent, Canstar found – with the market floor still held by LCU and Pacific Mortgage Group at 5.69 per cent.
The database showed 40 all up now holding variables below 6 per cent.
Canstar data insights director Sally Tindall said the volume of lenders cutting rates sent a clear signal of competition in the mortgage market, but warned borrowers not to mistake them for a sign the RBA has declared victory over inflation.
Canstar data insights director Sally Tindall.
Lowest variable home loan rates. Source: Canstar.com.au
“Competition among lenders continues to create opportunities for some households to cut their borrowing costs,” she said.
“Negotiating with your lender can get you on your way, but the bigger gains still typically come from refinancing.”
Ms Tindall flagged the Australian Prudential Regulation Authority’s Quarterly ADI Property Exposures report for March 2026 that saw loans in 30 to 89 days in arrears rise slightly on the back of the RBA rate hikes, but remain well below average at 0.49 per cent of the loan book.
“Similarly, the value of home loans on interest-only loans rose marginally in the March quarter to 11.8 per cent of all mortgages, also below average – evidence existing borrowers aren’t switching over to interest-only in search of relief from rising rates.”
“The same can’t be said for owner-occupiers buying property with next-to-no deposit. While overall lending took a backwards step in the March quarter, the proportion of new owner-occupier loans with a deposit of 5 per cent or less hit a record high – not exactly ideal timing given the subsequent slide in property prices.”
But she said “at just 4.3 per cent of all new owner-occupier loans, it’s unlikely to have APRA worried just yet”.
Proportion of new owner-occupier loans with deposit of 5pc or less. Source: Canstar
APRA found the share of new loans carrying a debt-to-income ratio above six times jumped to 10.8 per cent among investor borrowers, up from 8.2 per cent a year earlier.
Across all new borrowers, the figure rose to 6.4 per cent from 5.3 per cent – a ratio regulators will be watching closely.
Westpac remains the lone major bank forecasting a 25 basis point increase at the RBA’s August meeting.
The next RBA monetary policy board meeting is scheduled for August 10 and 11 – with two key datasets to come before then: the June quarter CPI on July 29 and the monthly household spending indicator on August 4.
The latest APRA data. Source: APRA
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