Under 10% of big bank mortgage customers have reduced their repayments after cash rate cuts

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on November 12, 2019
Under 10% of big bank mortgage customers have reduced their repayments after cash rate cuts

The big four banks have revealed the number of customers who’ve elected to reduce their mortgage repayments in the months following the recent cash rate cuts.

As part of the review of the four major banks, House of Representatives Standing Committee on Economics Chair Tim Wilson asked the big banks how many customers have had their repayments reduced since the Reserve Bank’s first cash rate cut in June.

The responses from each of the major banks revealed that fewer than 10% of variable-rate principal and interest (P&I) home loan customers have reduced their monthly repayments.

The nation’s biggest lender, Commonwealth Bank, said about 69,000 of its one million variable P&I mortgage accounts chose to reduce their repayments (6.9%), worth about $116 million.

ANZ, who has about 680,000 of these customers, said about 7% had cut their repayments.

ANZ estimates the reduction in interest due as a result of the two reductions in June 2019 and July 2019 to be worth approximately $57m per month.

Westpac said 0.9% of its 1.1 million variable P&I customers had reduced their interest rate, while NAB cited 0.7% of its customers had reduced from the June and July rate cut (not counting the October rate cut).

big 4 rate cut

Source: House of Representatives. *NAB data only includes responses to June and July rate cuts

Out of the 75 basis points of cash rate cuts over June, July and October, the big four reduced variable home loan rates by an average of 57 basis points.

Why so few?

Lenders typically require home loan customers to notify them if they want their repayments lowered following a cash rate cut.

In its response to the committee, the Commonwealth Bank said it proactively notifies customers if they are eligible to reduce their minimum repayment amounts.

“These customers have the choice to contact us online, via phone or branch to inform us they would like to reduce their monthly repayments to their new minimum repayment,” Commonwealth Bank said.

But some banks reduce customers’ repayments automatically.

For example Bankwest, which is owned by Commonwealth Bank and manages about 173,000 variable P&I mortgage accounts, automatically passes on the interest savings to the customers from the effective date of the interest rate change.

In its November monetary policy statement, the Reserve Bank of Australia (RBA) acknowledged the low number of people who’ve requested their bank to lower their home loan repayments.

“To date, the pick-up in new borrowing has been accompanied by faster repayment of existing loans,” the RBA said.

“This is consistent with historical experience that only a small share of borrowers on variable-rate mortgages actively adjust their scheduled repayments in the months following interest rate reductions.”

Further in its response, CommBank pointed out the benefits borrowers may have by not reducing their repayments in line with the cash rate cuts.

“If the customer chooses not to reduce their monthly repayments to reflect a recent rate change, then the differential is paid towards their loan in the form of an advance repayment,” Commbank said.

“If they have a loan with a redraw facility available, the differential may accumulate in the redraw for them to access later – providing flexibility to manage their financial circumstances beyond their home loan.”

If you’re looking to refinance to a lower rate home loan, below are some of the lowest variable home loan rates on offer between the big four banks, customer-owned banks and larger non-banks.

Lender

Variable
More details
UNLIMITED REDRAWSSPECIAL OFFER
  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
UNLIMITED REDRAWSSPECIAL OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
Variable
More details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES
  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
Variable
More details
ZERO APPLICATION FEESFEE FREE OFFSET
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
  • No upfront or ongoing fees
  • The shorter your loan, the less interest you pay in the long run.
ZERO APPLICATION FEESFEE FREE OFFSET

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
  • No upfront or ongoing fees
  • The shorter your loan, the less interest you pay in the long run.
Variable
More details
AN EASY DIGITAL APPLICATION
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
AN EASY DIGITAL APPLICATION

Neat Variable Home Loan (Principal and Interest) (LVR < 60%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
NO APPLICATION FEES
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
NO APPLICATION FEES

Yard Home Loan (Principal and Interest) (LVR < 80%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
NO UPFRONT OR ONGOING FEES
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
NO UPFRONT OR ONGOING FEES

Owner Occupier Accelerates - Evaporate (LVR 60%-70%) (Principal and Interest)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
NO UPFRONT OR ONGOING FEES
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
NO UPFRONT OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 80%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
UNLIMITED EXTRA REPAYMENTS
UNLIMITED EXTRA REPAYMENTS

Basic Home Loan (Principal and Interest) (LVR < 60%)

    Variable
    More details
    EASY DIGITAL APPLICATION
    EASY DIGITAL APPLICATION

    Neat Variable Home Loan (Principal and Interest) (LVR 70%-80%)

      Variable
      More details
      $0 APPLICATION FEE
      $0 APPLICATION FEE

      Budget Home Loan (Principal and Interest) (LVR < 80%)

        Variable
        More details
        100% FULL OFFSET ACCOUNT
        100% FULL OFFSET ACCOUNT

        Offset Package Home Loan (Principal and Interest) (LVR < 60%)

          Variable
          More details
          LIMITED TIME OFFER
          • Fast turnaround times, can meet 30-day settlement
          • No ongoing or monthly fees, add offset for 0.10%
          • Extra repayments + redraw services
          LIMITED TIME OFFER

          Smart Booster Home Loan Discounted Variable - 1yr

          • Fast turnaround times, can meet 30-day settlement
          • No ongoing or monthly fees, add offset for 0.10%
          • Extra repayments + redraw services

          Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of June 29, 2022. View disclaimer.


          Disclaimers

          The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

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          author-avatar
          William Jolly joined Savings.com.au as a Financial Journalist in 2018, after spending two years at financial research firm Canstar. In William's articles, you're likely to find complex financial topics and products broken down into everyday language. He is deeply passionate about improving the financial literacy of Australians and providing them with resources on how to save money in their everyday lives.

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