CBA, Westpac cut fixed home loans but leave variable rates unchanged
Two of the big four banks, Westpac and Commonwealth Bank, have not passed on the Reserve Bank’s record low cash rate to the bulk of their customers but have offered historic low rates to fixed interest mortgages and business loans.
The RBA cut the cash rate to 0.1 per cent on Tuesday and less than 24 hours later, the Commonwealth Bank of Australia and Westpac both announced changes to fixed mortgage and business loan rates.
Both CBA and Westpac’s standard variable rate mortgages have remained unchanged, however, the country’s two largest banks lowered fixed interest rates to 1.99 per cent on four-year mortgages for owner occupied customers.
CBA described the 1 per cent cut as the lowest ever advertised home loan rate.
CBA’s interest rates on business loans, including those using the government’s small business loan guarantee scheme, would also be cut by up to 0.5 per cent.
Westpac similarly reduced its fixed interest small business loans by 0.56 per cent, for customers on three to five year terms. These rate changes will be effective from November 9, it said.
CBA’s retail banking executive Angus Sullivan said the RBA’s move to stimulate the economy would give borrowers confidence.
“Yesterday’s move by the RBA will lower the structure of interest rates and provide confidence that Australians can borrow over the long term at historically low rates,” he said.
“We have reflected this in our interest rate settings, offering customers our lowest ever fixed rate.”
Westpac’s consumer chief executive Richard Burton said Australia was in an “extraordinary period” of monetary policy and interest rate changes needed to be carefully managed.
“We recognise it has been a tough time for many Australian households, and these changes mean that customers will be able to access even lower interest rates on our home loan and small business loans,” he said.
While CBA was the first major bank to make the move, a suite of smaller lenders immediately responded to the cheaper flow of money.
Canstar released research on Tuesday showing fintech Athena, which specialises in home loans, reduced its variable rate by 0.15 per cent. Other smaller lenders cutting their variable rates include Pacific Mortgage Group and Homeloans.com.au, which reduced rates between 0.10 per cent and 0.16 per cent.
The RBA’s rate cut will remain in place for at least the next three years, giving certainty to banks and other lenders about their funding costs.
It comes after CBA announced on Tuesday a moratorium on forces home sales until September 2021 for borrowers struggling with repayments during the coronavirus pandemic.
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