Police Credit Union made a bold move last week, slashing its owner-occupier variable rate to just 4.99% for borrowers with a 20% deposit – the first time since mid-2022 that any advertised variable rate has dipped into the 4s, according to Canstar.com.au data.
“Variable home loan rates starting with a ‘4’ are finally back on the table after a two-year hiatus,” said Canstar.com.au’s data insights director, Sally Tindall (pictured).
“Police Credit Union might not be a big-name brand, but with this move, it’s dialled up the competition in the variable mortgage market by at least a couple of notches.”
She noted this development is likely to intensify pressure on other lenders to follow suit: “The fact that the lowest variable rate is already below the 5% barrier before an RBA cut, will put pressure on other low-cost lenders to drop rates below this mark.”
Momentum in fixed rate cuts also continues. Over the past fortnight, 13 lenders have reduced at least one fixed home loan rate.
Among the key movers:
In total, 17 lenders are now offering at least one fixed home loan rate under 5%, including Bank of Queensland, Heritage Bank, and Australian Mutual Bank.
“Fixed rates continue to tumble as banks jostle for pole position, but that doesn’t mean everyone should rush to lock in,” Tindall said.
With both fixed and variable rates falling, Canstar noted the lowest variable is now only a fraction above the lowest fixed – a rare alignment last seen in July 2023.
While these lender moves came ahead of the latest CPI print, yesterday’s inflation figures now support the view that further interest rate cuts are likely.
ABS confirmed that headline inflation fell to 2.1% in the June quarter – down from 2.4% – while trimmed mean inflation dropped to 2.7%, both comfortably within the RBA’s 2-3% target band.
RBA governor Michele Bullock previously said the board would need to see the June quarter CPI before deciding its next move, adding that rate cuts were a matter of “when, not if”.
“Banks are sharpening their pencils to attract new customers,” Tindall said. “For anyone still sitting on a rate well into the 6’s, it’s a wake up call to get on the phone to your bank.”
The Canstar leader also cautioned borrowers considering fixed options to assess their strategy carefully: “Banks are dangling sharp fixed rates in front of borrowers chasing short term certainty, but with RBA cash rate cuts still on the table, potentially as early as 12 August, fixing could be a gamble.
“If you’re thinking about fixing, make sure you understand the trade-offs – you might be buying peace of mind, but it could come at a cost if rates fall faster than expected.”
For brokers, the combination of falling rates and a softer inflation outlook could see renewed activity among first-home buyers and refinancers. But with housing supply still tight and competition heating up, it’s a market that demands sharp pricing and strategic advice.
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