Photo source: Commonwealth Bank
Photo source: Commonwealth Bank
Two of Australia’s biggest lenders, Commonwealth Bank and Bendigo Bank, have dropped interest rates on some of their key home loan products.
Commonwealth Bank reduced its fixed package home loans as well as residential and investment fixed loans by up to 30 basis points.
The 30 basis point cuts apply to the bank’s five-year fixed owner-occupier loans.
The standalone five-year fixed product had its interest rate reduced from 4.54% to 4.24% (5.04% comparison rate), while the five-year ‘wealth package’ fixed loan is down from 4.39% to 4.09% (4.95% comparison rate).
In total 12 of the major bank’s home loan products had their rates slashed.
Key Commbank rate changes
|Product Name||Change (basis points)||New advertised interest rate (% p.a.)||Old avertised interest rate (% p.a.)||Comparison rate (% p.a.)|
|Investment Fixed P&I 2 yrs||-0.1||4.04||4.14||5.73|
|Investment Fixed P&I 3 yrs||-0.1||4.14||4.24||5.59|
|Investment Fixed P&I 5 yrs||-0.1||4.54||4.64||5.49|
|Residential Fixed P&I 3 yrs||-0.1||3.94||4.04||5.13|
|Residential Fixed P&I 4 yrs||-0.1||4.24||4.34||5.12|
|Residential Fixed P&I 5 yrs||-0.3||4.24||4.54||5.04|
|Wealth Package Investment Fixed P&I 2 yrs||-0.1||3.89||3.99||5.55|
|Wealth Package Investment Fixed P&I 3 yrs||-0.1||3.99||4.09||5.44|
|Wealth Package Investment Fixed P&I 5 yrs||-0.1||4.39||4.49||5.40|
|Wealth Package Residential Fixed P&I 3 yrs||-0.1||3.79||3.89||4.98|
|Wealth Package Residential Fixed P&I 4 yrs||-0.1||4.09||4.19||5.00|
|Wealth Package Residential Fixed P&I 5 yrs||-0.3||4.09||4.39||4.95|
Source: Commonwealth Bank
Key Bendigo Bank changes
Bendigo Bank reduced owner-occupied home loan variable rates by as much as 20 basis points on two products:
- The Bendigo Express Home Loan product has been reduced by 10 basis points to 3.79% for owner-occupier principal and interest loans;
- The Bendigo Basic Home Loan product has been reduced by 20 basis points to 3.79% for owner-occupier principal and interest loans
Bendigo Bank executive of consumer banking Richard Fennell said these changes are intended to promote greater choice for personal banking in Australia.
“We believe the decision to reduce rates on these products will prove timely for customers looking for a great value mortgage along with the fantastic customer experience,” Mr Fennell said.
“For customers who may be considering a new mortgage or change of mortgage provider, our decision to reduce the rate on our Basic and Express Home Loan products will provide them with a highly competitive offer.”
Commonwealth and Bendigo not the first to lower rates
These two aren’t the first banks and lenders in Australia to lower their home loan interest rates out-of-cycle, and on current trends they probably won’t be the last.
Already this year the likes of Macquarie, St George Bank, Adelaide Bank, AMP, Bankwest, UBank, Suncorp, BOQ, Me Bank and ING have cut interest rates on a variety of their home loan products, and these are just some of the bigger ones.
Other big banks NAB and Westpac have cut their fixed rate products for investors and owner-occupiers, while smaller lenders like Gateway Bank, IMB and Teachers Mutual Bank are also among those to cut, with the majority again being on fixed rate products.
Beyond Bank therefore have somewhat gone against the grain by cutting variable home loan rates.
Why did they drop rates?
Weak housing market conditions and subdued wage growth are two key factors leading many industry experts, including AMP chief economist Shane Oliver, NAB chief economist Ivan Colhoun and Westpac chief economist Bill Evans, to predict a cash rate cut by the end of the year.
The cash rate has currently been held at 1.50% for a record 30 RBA board meetings, but the plethora of fixed rate cuts (with some variable) are possibly being made with the expectation of these rate cuts, according to Mr. Guy Freeman, Managing Principal and Director of My Wealth Solutions.
“To put it simply: if the Commonwealth Bank has dropped its fixed rates, it’s likely they expect that the official rates set by the RBA to fall in the future,” Mr Freeman said.
“Since the home loan rates offered by the bank are based on the rates set by the RBA, this move by Commonwealth Bank may be them preparing for a potential future fall in cash rates.”
Bendigo meanwhile may have dropped rates to steal competition away from the big four banks.
“Bendigo Bank may have decreased its variable rates as a way of grabbing market share in the wake of the results of the Royal Commission,” Mr Freeman added.
“As a smaller bank with a relatively more positive reputation, Bendigo may actually stand to gain from the Royal Commission in terms of customer numbers.
“This decrease in variable rates may be another way to attract new customers and also customers away from the big banks.”
And it appears the rate cuts so far this year could be having the desired effect of boosting consumer borrowing – the value of new lending commitments to households was up by 2.6% in February, according to yesterday’s data from the Australian Bureau of Statistics.
The value of lending for owner occupier dwellings rose 3.4 per cent in February, while lending for investment dwellings recorded a more modest rise of 0.9 per cent.
This came as welcome news, given lending to households is down 15.7% overall over the past 12 months.
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