Lenders slash rates following RBA cut

by Madison Utley05 Nov 2020

Within hours of the Reserve Bank of Australia (RBA) cutting the nation’s cash rate to a record low of 0.10%, several smaller lenders jumped to action and immediately passed the savings through to their customers in full; the big four banks were noticeably absent from the list. 

Among the first to announce rate cuts of their own were Athena Home Loans (-0.15%), Reduce Home Loans (between -10.0% and -0.20%), Homestar Finance (-0.15%), Homeloans.com.au (-0.15%) and Pacific Mortgage Group (-0.10% and -0.16%), according to data from comparison site Canstar.

It wasn't until yesterday, 4 November, when three of the four majors announced their responses to Tuesday's cash rate decision. 

In a move that disappointed many, CBA made clear it will not be reducing rates for its existing variable rate customers, rather opting to cut fixed rates – effective from Wednesday, 11 November.

From that date, new owner occupiers paying principal and interest will be able to access the following:

  • 100 bps reduction to 1.99% p.a. on four-year loans
  • 15 bps reduction to 2.14% p.a. on two and three-year loans
  • 10 bps reduction to 2.19% p.a. on one-year home loans

“[Tuesday’s] move by the RBA will lower the structure of interest rates and provide confidence that Australians can borrow over the long term at historically low rates,” said Angus Sullivan, CBA group executive of retail banking services.

“We have reflected this in our interest rate settings, offering customers our lowest ever fixed rate – 1.99% fixed for four years – providing customers who fix some or all of their home loan with certainty and confidence into the future.”

The group also announced 2.99% p.a. secured and 3.99% p.a. unsecured business loans rates through the Government’s SME loan guarantee scheme, a reduction of up to 51 bps; additionally, the bank reduced rates on new three, four and five year fully secured BetterBusiness loans to 2.49%, also a reduction of approximately 50bps.

Westpac followed CBA's suit, announcing a range of fixed home loan rate cuts and reducing rates on a number of small business loans – leaving their existing variable rate customers out in the cold. 

From Monday, 9 November, owner occupiers paying principal and interest with a Premier Advantage Package can access a fixed interest rate of 1.99% p.a. on a four-year term; on the same date, a fixed rate of 2.09% p.a. will be available to the same borrower set for two and three-year terms.

Again similarly to CBA, Westpac cut interest rates for eligible new business loans provided under the Government’s Coronavirus SME Guarantee Loan Scheme, including:

  • fixed interest rate of 2.38% p.a. for terms of three to five years – a reduction of up to 0.56% p.a.
  • variable interest rate of 3.09% p.a. on fully secured small business loans – a reduction of 0.29% p.a.

Richard Burton, Westpac acting chief executive of consumer, said the group hopes its fixed rate home and small business loan rate reductions help the many Australians currently struggling.

“However, we are in an extraordinary period with the official cash rate at a historical low and unconventional monetary policy measures in place. It is critical we carefully manage interest rate changes, while continuing to do our part in supporting customers and the economy,” Burton added.

Minutes before the close of the business day on 4 November, NAB also unveiled cuts to its fixed rates ranging from 0.10% to 0.81%, with its 4-year rate dropping lowest to 1.98%.