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Two of Australia’s biggest banks have cut interest rates on a range of home loan products in what is shaping up to be the start of a lending war.
Commonwealth Bank and ING have cut mortgage rates, fueling a lending war where banks are desperate to attract new mortgage customers.
The nation’s largest bank has cut many of its lending products by up to 15 basis points, with its lowest reported floating rate at 2.69%.
ING, the country’s fifth-largest bank in terms of household balances and mortgages, also stabbed its lending product line, slashing rates by 10 basis points.
Its lowest advertised variable rate is 2.49 percent.
The move comes a week after Westpac began announcing the lowest floating rate offered among the four major financial institutions, offering a two-year floating rate of 2.19% which then drops to 2.69%.
RateCity’s research director Sally Tindall said Friday’s cuts would force the rest of the banking industry to start cutting rates before the Reserve Bank likely cuts the official cash rate in October or November.
“Mortgage rates may be at record highs, but they are unlikely to have bottomed out yet,” she said.
“These cuts by CBA, Westpac and ING will force other lenders to cut rates in an attempt to outbid Australia’s biggest banks.”
Westpac chief economist Bill Evans expects the central bank to cut the policy rate to 0.1% on the same day the Morrison government is expected to hand over the federal budget.
However, the RBA can wait until November to change interest rates to better understand what fiscal policy measures will be implemented after the October 6 budget date.
The low interest rate environment is pushing a large number of existing mortgage customers to take advantage of refinancing their loans as rates remain at historically low levels.
Major lenders are looking to capitalize on the wave of change activity, with banks also offering repayment deals to attract borrowers looking to refinance.
Ms Tindall said Westpac’s strategy of offering a low two-year variable rate in combination with a $ 3,000 repayment deal for refinancing was one of the more lucrative deals offered by a major bank.
“Westpac has changed its tactics to attract new customers, going from its base variable rate to an introductory rate of just 2.19% for the first two years,” she said.
“This introductory rate from Westpac, coupled with $ 3,000 in cash for refinances, is an incredibly competitive offer from a major bank.”
The lowest variable rate advertised in the home loan market is 1.89% Reduce Home Loan.
It can be acquired if a borrower has a loan-to-value ratio of 60 percent, which means that a mortgagee must already hold 40 percent of the capital required for the loan.
