On the back of the Reserve Bank of Australia’s move to recently cut interest rates out of cycle, the official cash rate is now sitting at a record-low 0.25%.
With this, the banks and various lending institutions have sought to realign some home loan rates. However, with banks’ profit margins now all but eroded, the extent of any rate cut being delivered to variable loan holders is no longer what it once was. In fact, ANZ is the only Big Four bank that passed on a (partial) cut to variable rates following the RBA’s emergency intervention.
Because of limited scope for lenders to reduce variable rates further, owner-occupiers are witnessing a widening differential between today’s variable rates and fixed rates. What is also worth noting is that competition in the fixed rate segment has intensified, with more lenders slashing rates as they vie for market share.
These developments have supported an environment that favours borrowers who are looking to refinance their home loan, which means now could be an opportune time to switch to a more competitive rate.
Investment Home Loans
NAB and Westpac are currently offering leading fixed rates of 2.59% for investment home loans, across both a 2-year and 3-year period based on principal and interest repayments.
As the RBA has signalled it has no intention to pursue negative interest rates, we are close to, if not already at the bottom of the interest rate cycle. With the prospect of being able to lock in record-low fixed rates from a Big Four for a term of 3 years, NAB and Westpac’s rates are compelling, especially when compared against other lenders. For example, Connective Select are offering their respective rates at 2.64%, alongside ING’s 2-year loan, while Bankwest’s 3-year loan is set at 2.69%.
In addition, NAB is currently offering borrowers who refinance a home loan of $250,000 or more with an eligible NAB Transaction Account a cash bonus of $4,000, which stands to potentially benefit those who switch to a ‘NAB Choice Package P&I Residential Investment Loan’.
In terms of variable rates, AMP is offering investment property borrowers a rate of 2.8% as part of its ‘Professional Package Variable P&I Investment Loan’ across 30 years. This is well below the next-best rates, with Better Choice running its leading variable investment loan at 2.94%, while the likes of Citi, Suncorp and ANZ are all in the range of 3.04-3.12%, alongside a host of smaller lenders.
Owner-Occupier Home Loans
ING is currently offering 2-year and 3-year fixed rate home loans with principal and interest repayments to owner-occupiers for 2.09% and 2.14% respectively.
These are followed by ANZ, NAB and ME bank courtesy of their own ‘special’ promotions for 2-year fixed rates of 2.19%, albeit NAB’s offer is targeted at first home buyers.
Leading variable rates come from Connective Essentials, with its ‘special’ 30-year P&I rate of 2.7%, while Citi is pushing its now-reduced ‘Basic Variable P&I Loan’ to owner-occupiers at 2.71%.
The ANZ ‘Simplicity PLUS Variable Special Offer P&I Loan’ has been cut to 2.72%, while ING, Bank of Melbourne (plus its affiliates Bank SA and St George), P&N Bank and Auswide Bank are all offering owner-occupiers 30-year variable rates at 2.74%.
While lower home loan rates are a positive for borrowers to consider refinancing, each of the above-mentioned rates are subject to a number of terms and conditions that vary from lender to lender.
Existing borrowers and/or prospective borrowers should check with their bank or mortgage broker to see if they qualify for rates advertised and any other promotional bonuses that are currently being offered.