Big Four Banks Adjust Home Loan Rates Following RBA’s Cut
Source: AAP
In response to the Reserve Bank of Australia’s (RBA) recent cash rate adjustment, three of Australia’s major banks—Commonwealth Bank (CBA), National Australia Bank (NAB), and Australia and New Zealand Banking Group (ANZ)—are reducing their variable home loan interest rates effective immediately. Westpac will also follow suit but will implement changes on Tuesday.
As a result of the RBA’s decision to lower the cash rate by 0.25% to 3.85%, over 20 lenders have already reduced their variable rates. Nonetheless, more than 50 other lenders have made announcements regarding rate cuts but have not yet enacted these changes.
Harrison Astbury, an editor and research analyst at Infochoice, noted that some banks may delay mortgage rate adjustments until June 10 or 11, a significant lag compared to the RBA’s announcement. P&N Bank and Tasmania-based Bank of Us are termed the slowest, while Bendigo Bank follows, postponing cuts until June 6.
Currently, Horizon Bank offers the lowest variable rate in the market at 5.25% for first-home buyers, while CBA, Westpac, and ANZ’s lowest variable rates will be 5.59%, with NAB at 5.94%.
Both NAB and Westpac have reduced savings rates ahead of their home loan rates. Westpac’s savings cuts take effect today, while mortgage rate cuts will be implemented on June 3. NAB also lowered savings rates last Friday, coinciding with today’s mortgage reduction. Astbury highlighted that this delay could yield substantial profits for these banks; for instance, Westpac might earn an estimated $2.4 million daily during the interim.
NAB’s potential gains from the delay could be around $766,000 a day, mostly due to lower net interest margins.
In comparison, CBA and ANZ have synced their savings cuts with the implementation of home loan rate reductions today. CBA has discreetly passed on the RBA’s 25 basis-point cut to its savings account holders.
The gap between savings and home loan rate cuts is most pronounced with AMP, which is taking ten days to adjust.
For homeowners, the financial relief from the recent RBA decision would translate to an average drop of $91 in monthly payments for a $600,000 loan over 25 years. However, CBA, ANZ, and NAB do not automatically adjust payments following rate cuts, requiring borrowers to initiate changes themselves. Depending on their billing cycles, some may not see reduced payments until at least late June or July.
Sally Tindall, Canstar’s data insights director, suggested borrowers evaluate whether to reinvest the savings into their mortgage to potentially shorten repayment periods and save on interest over the life of the loan.
Astbury has urged lenders to expedite the passing on of rate cuts to their customers. Notably, Unloan and Athena promptly adjusted new and existing variable rates in alignment with the RBA’s announcement. Macquarie followed closely by cutting rates three days later.
Astbury expressed frustration over the slow response from some banks, claiming that various justifications—such as outdated IT systems—are insufficient. He believes the underlying reason for reluctance among some banks to adjust rates quickly is to protect profit margins, especially amid competitive pressures from smaller lenders.
For further updates and insights on the ever-changing finance landscape, follow Yahoo Finance on Facebook, LinkedIn, and Instagram.
