The most recent cuts made by a major across its variable and fixed home loans has confirmed “the rate race is on” and even the big four are in the running, according to a financial commentator.
NAB yesterday announced cuts of up to -0.15% across a number of owner occupied and investment loans, bringing its new variable rate special offer of 2.69% to equal that of Westpac as the lowest variable of the major banks.
“The banks are taking advantage of record low wholesale funding rates,” explained Canstar group executive of financial services Steve Mickenbecker.
“The 0.10% cuts to a range of principal and interest 1- and 2-year fixed rates confirms fixed rate lending continues as the banks’ instrument of choice, as they jockey for share of booming refinance demand in an otherwise flat lending market.”
NAB’s 1-year fixed rate is just 0.11% above the lowest 1-year rate, while its 2-year fixed rate is only 0.10% above the lowest 2-year fixed rate, according to comparison site Canstar’s database.
“It is starting to look like when and by whom [will] rates breach the 2% mark, no longer if they will,” said Mickenbecker.
“If variable rates were to reach as low as 1.99%, the possible savings on a $400,000 average variable rate loan at 3.47% could be just over $300 a month or over $3,700 a year.”
However, while lenders of all sizes are largely reducing rates, ING is one of the few to go against the grain, increasing its fixed rate home loans from today.
“For owner occupiers, the increases range from 0.05% to 0.20%, but for investors they are as high as 0.40%, suggesting the bank is reviewing its appetite for housing risk,” explained Mickenbecker.
“ING’s 2-year fixed rate for owner occupiers remains amongst the market leaders, but they have relinquished their lowest price position.”
The changes move the non-major’s former market leading 2-year fixed rate of 2.09% out of the top three lowest 2-year fixed rates available, with the interest rate now sitting at 2.19%.