Canstar expert Sally Tindall. Picture: Tim Hunter.
OPINION
One of the major banks went rogue this week, cutting interest rates on variable home loans, despite the RBA continuing to leave the official cash rate on hold.
And what a cut it was!
The NAB slashed 40 basis points from its basic variable loan. It now sits at 6.44 per cent, which could save average customers a couple of hundred bucks a month.
A normal rate cut from the RBA is 25 basis points. So the NAB cut almost represents two cuts, especially when you consider that, despite always finding it necessary to pass on cash rate increases in full, banks are often mysteriously unable to pass on an entire rate cut.
Usually, once the RBA cuts rates, the banks start shifting nervously from one leg to the other, taking a sideways glance at one another, until one eventually says “We’ll cut by 15 points …”
Then there’s a mass sigh of relief and all the others either cut by the same, or a little bit extra to gain an edge on the competition.
RBA Governor Michele Bullock announcing rates would stay on hold yet again. Picture: Nikki Short
MORE:Why the RBA must cut rates in December
After all, some major bank profits are down to the single digit billions these days, so they can’t afford to be too generous.
It’s what makes NAB’s bold statement seem even more remarkable. So, will the others follow suit? And when?
Wait a minute. On closer inspection, the other big four members were already offering lower rates than NAB. ANZ’s best rate is at 6.14 per cent. CBA’s best is 6.15 per cent. And Westpac was already at 6.44 per cent, meaning NAB is now just matching it.
Canstar’s data director Sally Tindall pointed out that more lenders have been cutting variable rates since August than have been hiking them.
“This rate cut by NAB brings its lowest variable rate back in line with the big bank pack,” Ms Tindall said.
NAB’s 40 basis point rate cut really just brought it into line with the rest of the major lenders. Picture: Lisa Maree Williams/Getty Images
While each of these loan products comes with different conditions- CBA and ANZ are for refinancers only, while Westpac requires a 30 per cent deposit compared to NAB’s 5 per cent deposit- none of them are the cheapest on market.
For a growing number of Aussie borrowers, it doesn’t matter what the big four banks do with their rates, because they bank with someone else.
Canstar research shows there are 38 lenders currently offering at least one variable rate under 6 per cent.
MORE:How I saved $3000 on my mortgage with one phone call
Abal Banking (formerly Arab bank of Australia) currently offers a 5.75 per cent variable rate for those with a 40 per cent deposit. A borrower with a $500,000 loan would already be paying $5447 less a year in interest than a NAB customer on 6.88 per cent.
The next cheapest rate is 5.88 per cent at the Bank of China; a saving of $4797 a year.
Then ranging between 5.89 per cent and 5.94 per cent are Pacific Mortgage Group, RACQ Bank, The Mutual Bank, People’s Choice, Mortgage house, Police Credit Union, Australian Mutual Bank and Tiimely Home.
Borrowers with each of these lenders are saving at least $4500 a year.
Switching to one of them could basically double the NAB’s double rate cut … a quadruple rate cut! And if rates get slashed four times next year as economists predict, that quadruple rate cut will be doubling again! It’s an Octuple cut! By then, many of those average borrowers will be about $10,000 a year better off than they are now.
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