Eight lenders have slashed a total of 50 fixed rates in the past week, according to Canstar, even after the Reserve Bank (RBA) held the cash rate steady at 3.6%.
The moves signal growing competition among lenders as first-home buyer incentives expand, and affordability challenges persist.
Canstar data shows the average variable rate for owner-occupiers paying principal and interest sits at 5.93%, while the lowest available variable rate is 4.99%, offered exclusively to first-home buyers by G&C Mutual Bank, Horizon Bank, and Unity Bank. For refinancers, in1bank leads the market at 5.08%.
There are now 534 rates below 5.25% on Canstar’s database, up from 492 a week earlier.
Canstar’s data insights director Sally Tindall (pictured) said the volume of fixed-rate cuts was unexpected given the central bank’s cautious stance.
“Eight lenders cut a total of 50 fixed rates over the last week, including challenger banks ING and Heritage, which both cut their lowest fixed rates down to 4.99,” Tindall said. “As a result, there are now 38 lenders offering at least one fixed rate under 5%,” Tindall said.
“This flurry of fixed rate cuts wasn’t exactly the response we were expecting following last week’s decision from the RBA to keep rates on hold and more than a hint from the central bank that further cuts might not materialise this year.”
She added that while most big banks are signalling only one further cash rate cut before 2026, competition remains fierce among smaller lenders seeking to attract first-home buyers and refinancers.
“Certainly, three of the big four banks now believe the next cash rate cut won’t be until 2026 and that we’ll only see one more cut before the bottom of this current cycle,” Tindall said.
The federal government’s newly uncapped Home Guarantee Scheme is also driving renewed activity in the market. The expansion removes both income caps and limits on the number of available places, allowing more borrowers to enter the market with a 5% deposit and no lenders mortgage insurance.
“The government’s newly uncapped Home Guarantee Scheme is now up and running with no limit on the number of places or the income first home buyers can earn to be eligible for the program,” Tindall said.
However, she warned that many aspiring buyers may still fall short of banks’ serviceability tests.
“While this helps reduce the burden of saving for a decent-sized deposit, passing a bank’s serviceability test will prove difficult for many who just don’t have a big enough income to service the level of debt required to step foot into the market,” Tindall said.
Recent APRA guidance on the treatment of student (HELP) debts is also giving some borrowers a modest boost in borrowing capacity.
“That said, APRA’s change in guidance around the assessment of HELP debt, which also came into effect last week, will help those lugging around student debts, provided they’re on track to pay off in the near term,” Tindall said.
Major banks have responded by adjusting their credit assessment policies.
“Certainly, NAB has said it won’t include student debts in its serviceability calculations if someone owes $20,000 or less,” Tindall said. “CBA has said it will exclude HELP debt where the borrower is set to repay it within the next 12 months, while for those on track to repay this debt within one to five years, it will apply a lower serviceability buffer.”
The Canstar leader said even small changes can make a tangible difference for borrowers on the edge of affordability.
“This may seem like a small olive branch in the big picture of buying a home, however, existing debts can significantly erode a person’s borrowing power and will be a genuine leg up on to the ladder for some,” Tindall said.
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