Westpac mirrors CBA with no cut for variable rate customers

Westpac mirrors CBA with no cut for variable rate customers

Australia’s second biggest bank has followed CBA, announcing it will not be passing on the rate cut to its existing variable rate customers, opting to cut fixed rates instead.

Westpac home loan rate changes – based on a loan-to-value ratio of under 70%

Loan type     Current Rate     New Rate     Change    
Standard variable    

4.48%

   

4.48%

   

0%

   
Discounted variable    

3.19%

   

3.19%

   

0%

   
Lowest variable    

2.19% for 2yrs, 2,69% after

   

2.19% for 2yrs, 2.69% after  

   

0%

   
1 year fixed    

2.19%

   

1.99%

   

0.20%

   
2 year fixed    

2.19%

   

1.99%

   

0.20%

   
3 year fixed    

2.19%

   

1.99%

   

0.20%

   
4 year fixed    

2.69%

   

1.89%

   

0.80%

   
5 year fixed    

2.69%

   

2.69%

   

0%

   

Note: the above rates are for owner occupiers paying principal and interest based on a loan balance of $400K. Based on an LVR of under 70%

Missed savings for existing Westpac variable customers

    Rate     Repayments     Repayments if 0.15% cut had been passed on     Difference    
Standard variable    

4.48%

   

$2,022

   

$1,987

   

$35

   
Discounted variable    

3.19%

   

$1,728

   

$1,695

   

$33

   
Lowest variable    

2.19% for 2 yrs then 2.69%

   

$1,517

   

$1,486

   

$30

   

Notes: based on an owner occupier paying principal and interest over 30 years with a $400K loan. Based on a LVR of 70%.

RateCity.com.au research director, Sally Tindall, said Australia’s two biggest banks had served up some sour news to their variable rate mortgage customers.

“Governor Lowe has said he believes this rate cut will be passed through as people refinance or renegotiate their home loan, but he’s forgotten about the thousands of Australians who aren’t in a position to do so,” she said.

“These are the people who need this rate cut, but based on the response from the banks so far, they’re precisely the ones who are going to miss out.


“Anyone who’s lost their job, or on a mortgage deferral or who simply don’t have enough equity in their loan to refinance are in mortgage prison. They can’t switch lenders. They either have to stick on a high variable rate or fix with their current bank.

“Westpac now has the lowest fixed rate loan in Australia currently.

“These are cracking new fixed rates from the big banks which can potentially save the average mortgage holder hundreds of dollars a month, but only for customers willing to fix.

“If you are on a mortgage deferral, looking to sell your property in the next few years or looking to get ahead on your mortgage then it’s unlikely a fix rate is going to suit you,” she said.

Tips for variable rate customers

  • Ask your bank for a rate cut. Check what they are offering new customers and if you are paying more, ask them to match it.
  • Consider refinancing. If you want to stay on a variable rate and are in a position to switch lenders, there are rates as low as 1.77 per cent, particularly for people with a decent amount of equity.
  • Consider a fixed rate. Remember – fixing comes with strict terms and conditions and typically won’t let you get significantly ahead on your repayments.

Extra repayments – fixed rate caps from the big four banks

CBA: up to $10,000 per year

Westpac: up to $30,000 per fixed rate term

NAB: up to $20,000 per fixed rate term

ANZ: ANZ: 5% of the loan balance or $5,000 per year, whichever is less. (The 5% is calculated at the start of the fixed period).

Things to consider before fixing

  • Will I want to make extra repayments? Most banks have caps on how much extra you can repay while on a fixed rate.
  • Do I need an offset account? Most banks don’t offer an offset account on their fixed rates.
  • Will I need to get out of the loan early? There can be hefty break fees if you do.
  • What is the revert rates? If you do fix, make a note of when the fixed term ends so you can negotiate a lower variable rate, refix or refinance. If you set and forget your fixed rate for the long term it could end badly. 

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Learn more about home loans

What is the difference between a fixed rate and variable rate?

A variable rate can fluctuate over the life of a loan as determined by your lender. While the rate is broadly reflective of market conditions, including the Reserve Bank’s cash rate, it is by no means the sole determining factor in your bank’s decision-making process.

A fixed rate is one which is set for a period of time, regardless of market fluctuations. Fixed rates can be as short as one year or as long as 15 years however after this time it will revert to a variable rate, unless you negotiate with your bank to enter into another fixed term agreement

Variable rates is that they are typically more flexible than their fixed rate counterparts which means that a lot of these products will let you make extra repayments and offer features such as offset accounts however fixed rates do offer customers a level of security by knowing exactly how much they need to set aside each month.

What is the difference between fixed, variable and split rates?

Fixed rate

A fixed rate home loan is a loan where the interest rate is set for a certain amount of time, usually between one and 15 years. The advantage of a fixed rate is that you know exactly how much your repayments will be for the duration of the fixed term. There are some disadvantages to fixing that you need to be aware of. Some products won’t let you make extra repayments, or offer tools such as an offset account to help you reduce your interest, while others will charge a significant break fee if you decide to terminate the loan before the fixed period finishes.

Variable rate

A variable rate home loan is one where the interest rate can and will change over the course of your loan. The rate is determined by your lender, not the Reserve Bank of Australia, so while the cash rate might go down, your bank may decide not to follow suit, although they do broadly follow market conditions. One of the upsides of variable rates is that they are typically more flexible than their fixed rate counterparts which means that a lot of these products will let you make extra repayments and offer features such as offset accounts.

Split rates home loans

A split loan lets you fix a portion of your loan, and leave the remainder on a variable rate so you get a bet each way on fixed and variable rates. A split loan is a good option for someone who wants the peace of mind that regular repayments can provide but still wants to retain some of the additional features variable loans typically provide such as an offset account. Of course, with most things in life, split loans are still a trade-off. If the variable rate goes down, for example, the lower interest rates will only apply to the section that you didn’t fix.

What is a variable home loan?

A variable rate home loan is one where the interest rate can and will change over the course of your loan. The rate is determined by your lender, not the Reserve Bank of Australia, so while the cash rate might go down, your bank may decide not to follow suit, although they do broadly follow market conditions. One of the upsides of variable rates is that they are typically more flexible than their fixed rate counterparts which means that a lot of these products will let you make extra repayments and offer features such as offset accounts.

What is a fixed home loan?

A fixed rate home loan is a loan where the interest rate is set for a certain amount of time, usually between one and 15 years. The advantage of a fixed rate is that you know exactly how much your repayments will be for the duration of the fixed term. There are some disadvantages to fixing that you need to be aware of. Some products won’t let you make extra repayments, or offer tools such as an offset account to help you reduce your interest, while others will charge a significant break fee if you decide to terminate the loan before the fixed period finishes.

What happens to my home loan when interest rates rise?

If you are on a variable rate home loan, every so often your rate will be subject to increases and decreases. Rate changes are determined by your lender, not the Reserve Bank of Australia, however often when the RBA changes the cash rate, a number of banks will follow suit, at least to some extent. You can use RateCity cash rate to check how the latest interest rate change affected your mortgage interest rate.

When your rate rises, you will be required to pay your bank more each month in mortgage repayments. Similarly, if your interest rate is cut, then your monthly repayments will decrease. Your lender will notify you of what your new repayments will be, although you can do the calculations yourself, and compare other home loan rates using our mortgage calculator.

There is no way of conclusively predicting when interest rates will go up or down on home loans so if you prefer a more stable approach consider opting for a fixed rate loan.

What is a standard variable rate (SVR)?

The standard variable rate (SVR) is the interest rate a lender applies to their standard home loan. It is a variable interest rate which is normally used as a benchmark from which they price their other variable rate home loan products.

A standard variable rate home loan typically includes most, if not all the features the lender has on offer, such as an offset account, but it often comes with a higher interest rate attached than their most ‘basic’ product on offer (usually referred to as their basic variable rate mortgage).

What is a honeymoon rate and honeymoon period?

Also known as the ‘introductory rate’ or ‘bait rate’, a honeymoon rate is a special low interest rate applied to loans for an initial period to attract more borrowers. The honeymoon period when this lower rate applies usually varies from six months to one year. The rate can be fixed, capped or variable for the first 12 months of the loan. At the end of the term, the loan reverts to the standard variable rate.

Does the Rate Guarantee apply to discounted interest rate offers, such as honeymoon rates?

No. Temporary discounts to home loan interest rates will expire after a limited time, so they aren’t valid for comparing home loans as part of the Rate Guarantee.

However, if your home loan has been discounted from the lender’s standard rate on a permanent basis, you can check if we can find an even lower rate that could apply to you.

What is an ongoing fee?

Ongoing fees are any regular payments charged by your lender in addition to the interest they apply including annual fees, monthly account keeping fees and offset fees. The average annual fee is close to $200 however there are almost 2,000 home loan products that don’t charge an annual fee at all. There’s plenty of extra costs when you’re buying a home, such as conveyancing, stamp duty, moving costs, so the more fees you can avoid on your home loan, the better. While $200 might not seem like much in the grand scheme of things, it adds up to $6,000 over the life of a 30 year loan – money which would be much better off either reinvested into your home loan or in your back pocket for the next rainy day.

Example: Anna is tossing up between two different mortgage products. Both have the same variable interest rate, but one has a monthly account keeping fee of $20. By picking the loan with no fees, and investing an extra $20 a month into her loan, Josie will end up shaving 6 months off her 30 year loan and saving over $9,000* in interest repayments.

What are extra repayments?

Additional payments to your home loan above the minimum monthly instalments, which can help to reduce the loan’s term and remaining payable interest.

Can I check my rates more than once? Can I go back to view loans from a different device (e.g. my phone) or at another time without having to enter details in again?

You can only check your rates once. However we will send you, via email, the link to the result page so that you may return to it.

Does Australia have no-deposit home loans?

Australia no longer has no-deposit home loans – or 100 per cent home loans as they’re also known – because they’re regarded as too risky.

However, some lenders allow some borrowers to take out mortgages with a 5 per cent deposit.

Another option is to source a deposit from elsewhere – either by using a parental guarantee or by drawing out equity from another property.

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Who can enter?

Any Australian resident who is over 18 and currently has a personal home loan is eligible for our Rate Guarantee. See terms and conditions.