Canstar data insights director Sally Tindall. Picture: Tim Hunter.
ANALYSIS
Banks may know something we don’t know about future rate cuts, because nine lenders have cut variable rates on home loans over the past month.
While the RBA left the official cash rate on hold at its October meeting, a number of lenders were quietly sharpening their rates for owner-occupiers paying principal and interest loans.
A Canstar analysis of market movement between 24 September and 21 October found that Aussie had dropped its rates by 0.25 per cent, effective 15 October.
P & N Bank moved in September, slashing by “up to” 0.25 per cent, while ME Bank cut by “up to” 0.19 per cent the following day.
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Banks cutting by “up to” a certain number means they have scaled their discount by Loan to value Ratio (LVR), so customers at a certain LVR tier may get the full 0.25 per cent discounts, while others may only qualify for 0.17 per cent, for example.
Westpac was the only big four bank on the cutting list, slashing 0.10 per cent from its variable rate to 5.24 per cent, giving it a lower rate than CBA, ANZ and NAB; though the deal was for online customers only.
Others to cut by 0.10 per cent included Bank of China, MOVE Bank and Bankwest.
Queensland Country Bank cut by 0.05 per cent, while Bank of Us cut by “up to” 0.05 per cent.
RBA Governor Michele Bullock. Picture: Jeremy Piper
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“The fact that nine lenders have cut variable rates in the past month, despite no move from the RBA, shows that competition in the mortgage market is still red-hot,” Sally Tindall, Canstar data insights director, said.
“It’s a classic example of the loyalty tax in action. While the door is open for new customers to walk into a competitive deal, hordes of loyal customers are left paying uncompetitive rates on their mortgage.”
Ms Tindall said borrowers should be proactive, rather than hope for further RBA cuts to make savings.
“Make lenders’ out of cycle rate cuts your ticket to a better deal,” she said. “If you’re paying more than what your bank is offering new customers, pick up the phone and ask them why. After all, you’ve already got proof that your bank can afford to lower your rate.
“If your bank won’t budge and you’re on a variable rate loan, it could be worth making the switch. Yes, refinancing is a bit of paperwork but advancements in technology have helped streamline the process. At the end of the day, if you’re lugging around a giant wad of debt on an uncompetitive rate, the savings you could potentially make from switching could make for a pretty epic hourly rate.
AMP chief economist Shane Oliver has predicted more rate cuts. Picture: John Appleyard
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Banks cutting rates can signify more RBA rate cuts ahead, as lenders offer partial cuts to entice borrowers in beforehand.
The moves come after AMP chief economist Shane Oliver predicted “several more” RBA cuts to come in this cycle.
“One in November, another in February and probably another one in May,” Dr Oliver told Mark Bouris, while a guest on his podcast.
“So that will take the cash rate down to 2.85 per cent.”
While this would equate to more borrowing power for buyers, Mr Oliver said it would also work to drive up property prices.
“When rates went down people got a lot of money and spent and drove up property prices,” he said.
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