Mortgage rates are continuing to ease following the Reserve Bank’s (RBA) latest decision to cut the cash rate by 0.25 percentage points last Tuesday - the second rate cut so far this year.
The May move to 3.85% marked a turning point in the RBA’s monetary policy stance, with Governor Michele Bullock describing it as a “confident cut”. According to Westpac, the decision reflects “growing confidence within the central bank that inflation is under control and that domestic risks now warrant further easing.”
In response, four lenders cut 21 owner-occupier and investor variable rates, with an average reduction of 0.25%. Meanwhile, another four lenders dropped 78 fixed rates for both owner occupiers and investors, cutting an average of 0.29%, Canstar reported.
The average variable rate for owner-occupiers paying principal and interest now sits at 6.5%, while the lowest available variable rate - excluding introductory, first-home buyer and eco rates - is 5.39% from Horizon Bank.
As rate reductions continue to flow through, Canstar’s database now lists 857 rates under 5.75%, up from 786 the previous week.
Sally Tindall (pictured), Canstar’s insights director, said banks are already starting to move.
“It was a big week in mortgages with the RBA cutting by 0.25 percentage points last Tuesday – the second cut for the year,” Tindall said. “In good news for borrowers, the majority of the market has already announced they’ll be passing this cut on to their variable customers in full.”
See in the table below the list of lenders offering rates below 5.75%.
While some lenders acted quickly, the larger banks are taking a more measured approach.
“While some lenders took the bull by the horns and passed on the cut immediately, in the case of Unloan and Athena, or near immediately in the case of Macquarie, which moved last Friday, the big banks are taking the usual 10 to 14 days from the announcement to lower rates for their variable borrowers,” Tindall said.
“This is the exact same timeline the big banks followed when the cash rate was on its way up and considering there were many more hikes than there are likely to be cuts on the way down, it appears to be a relatively fair deal for borrowers.”
Still, the Canstar leader noted that many borrowers are eager for relief sooner.
“That said, it’s still clearly a bug bear for many customers who could do with this rate relief as soon as possible,” Tindall said. “Macquarie Bank has recognised it’s an opportunity for a small win and it will be interesting to see if this move pressures any of the big banks to follow its lead, should we see further cuts from the RBA.”
As of this week, nearly 20 banks have confirmed at least one rate under 5.5%, but Tindall expects more to come.
“This number could reach over 30 by the time all lenders in the database declare their post-RBA hand,” she said.
Looking ahead, the RBA appears open to further easing, but Tindall urged caution.
“As for future rate cuts? Certainly the RBA is keeping the door open which means we could see a couple more land before Christmas,” she said, “however, borrowers would do well to refrain from baking these into their budget until they land into their bank accounts.”
