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All of the major banks have sliced interest rates on fixed rate home loans

All of the major banks have sliced interest rates on fixed rate home loans

Nov 4th, 2020 • Industry News • Home Loans

All of the major banks have sliced interest rates on fixed rate home loans and some business loans but left standard variable rates unchanged, as rock-bottom deposit rates limit their ability to pass this week's Reserve Bank rate cuts to all borrowers and margins come under renewed pressure from the extreme policy.

The combination of actions by the RBA this week will push more mortgage customers towards fixed interest rates. To get the benefit of lower rates, home loan customers on standard variable rate loans will need to refinance to fixed terms, while existing fixed rate loans do not change.

Commonwealth Bank and Westpac are both offering a four year, fixed rate mortgage at 1.99 per cent, while National Australia Bank said it will undercut this with a 1.98 per cent rate. It's the first time any of the banks have offered a mortgage at below 2 per cent.

ANZ followed late on Wednesday, with a four-year fixed rate at 2.29 per cent. All of the big four also reduced one-, two- and three-year fixed rates for owner occupiers. Fixed rates are now lower than the best variable rate mortgages on offer.

Small businesses borrowing under the government's SME loan guarantee scheme will also be cheaper, as CBA, Westpac NAB and ANZ cut rates on some business loans by more than the 0.15 per cent reduction in the cost of Term Funding Facility funding, under which the RBA is providing three-year funding to banks at 0.1 per cent.

Credit analysts at CBA estimated the total monetary easing package unveiled by the RBA on Tuesday could reduce major banks’ funding costs by around half the 25 basis point cut to the cash rate target, which was limiting the extent of the pass‑through to lending rates.

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