Lenders kept cutting new-customer rates this week, widening the gap with existing borrowers just as the Reserve Bank prepares to hand down its August decision, with Canstar data suggesting the softening some banks are reporting in applications hasn't yet dented the bigger picture.
Four lenders cut a combined six owner-occupier and investor variable rates this week by an average of 0.12%, while two lenders trimmed six fixed rates on three-year terms by an average of 0.17%.
The average variable rate for owner-occupiers paying principal and interest now sits at 6.64%, though the lowest rate on Canstar's database, offered by LCU and Pacific Mortgage Group, remains 5.69%. Only three rates on the database sit below 5.75%, unchanged from the previous week — though more broadly, 49 lenders now offer at least one variable rate below 6%, up from 38 at the start of June, with 60% of lenders on Canstar's database offering at least one rate starting with a five.
Canstar data insights director Sally Tindall said lenders were continuing to compete hardest for new business.
"Four more lenders cut variable rates this week as the new customer discounting continues as a game of stacks on," Tindall said.
That competition is playing out against a genuinely mixed demand picture. Tindall noted Westpac had reportedly seen mortgage applications fall 20% in the month following February, March, and May's rate hikes and the May budget's tax changes — but that softness isn't showing up in the official numbers yet.
"It's difficult to see this in the official data as yet, with APRA monthly showed an increase in the banks' residential mortgage books of a healthy 0.7%, with a whopping $5 billion rise for CBA in one month alone," she said.
The rate competition comes as the RBA hands down its August decision on Tuesday, a meeting Tindall said borrowers shouldn't expect to bring good news. All four big banks believe the cash rate has now peaked, but none forecast a cut until 2027. Tindall said the inflation picture didn't support any near-term easing.
"Currently core inflation is stuck at 3.6% and still a long way from target. The RBA isn't going to declare the battle with inflation won and done at tomorrow's meeting," she said.
For borrowers who haven't reviewed their rate in years, Tindall said the savings case remains compelling. Someone who took out a 30-year loan in August 2021 and hasn't renegotiated since is likely paying around 6.97%, despite dozens of lenders now offering sub-6% rates. On a $600,000 debt, switching could save more than $10,000, even after switching costs and future rate movements — "potentially a low-effort refinance, especially with the help of a mortgage broker," she said.
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