‘Mortgage war’ begins: Westpac re-calibrate variable rates
Westpac has re-calibrated its lowest variable rate ahead of the Reserve Bank of Australia meeting in a bid to ease the "mortgage war" that follows a rate cut.
Australia’s second-largest bank has decreased its variable rate by 0.40 percentage points, now reaching 6.44 per cent.
Westpac’s previous lowest variable rate was 6.44 per cent, but increased by 0.40 percentage points after the first two years, which the bank has now removed to appeal to more borrowers.
Westpac’s move follows rate cuts from the other major banks last year, including reductions to new customer variable rates by CBA, NAB, and ANZ.
Canstar data insights director, Sally Tindall, said the “mortgage wars are set to reignite” as a rate cut fast approaches.
“The big banks will almost certainly pass the first RBA cut on in full to their variable rate borrowers; however, we could see some lenders cutting new customer variable rates even further to capitalise on what could become a refinancing revival,” Tindall said.
“Borrowers across the country will be laser-focused on what their new variable mortgage rate will be, and ideally take the time to check what other lenders are offering.”
Currently, ANZ has the lowest advertised variable rate out of the big four banks at 6.09 per cent, followed by CBA at 6.15 per cent.
Westpac and NAB both offer variable rates at 6.44 per cent.
Canstar noted that while banks have been adjusting their new customer variable rates, these cuts haven’t been extended to existing customers unless borrowers negotiate directly with their bank.
The RBA rate cut has been anticipated by the industry for months following “better-than-expected” inflation figures, with trimmed mean inflation at an annual rate of 3.2 per cent.
Data analysis by Canstar anticipated borrowers could see their monthly repayments drop by $92 if the cash rate drops by 0.25 percentage points down to 4.10 per cent, for an owner-occupier with a $600,000 debt and 25 years remaining.
Tindall said while variable rates dropping is expected in the first couple of weeks following the RBA meeting, borrowers shouldn’t assume their mortgage repayments will drop.
“This is because some banks won’t lower a borrower’s monthly repayments when rates are cut unless the bank is explicitly asked to do so by the customer.”
While Tindall understands that some borrowers won’t be able to save the “extra money” and will need to cover outstanding bills after the RBA rate cut, she encourages those who can to maintain their mortgage repayments.
“When your interest rate drops but your monthly mortgage repayments stay the same, the money that previously was going to the bank in extra interest charges will go straight towards paying off your debt faster.”
“It will help you build an additional buffer in your mortgage, and potentially save you thousands, even tens of thousands of dollars over the life of your loan,” Tindall concluded.