Big banks cut fixed rates but leave variable rate customers out in the cold

Following this week’s RBA rate cut, the big banks are scrambling to lock in quality borrowers with substantial cuts to fixed rates. But all four have withheld relief to existing variable rate customers.

One day out from the RBA’s decision to lower official interest rates to 0.1%, CommBank announced it will be making cuts of between 10 and 100 basis points across its fixed rate suite, taking 4-year fixed rates just below the 2% mark.

The other major banks followed suit, with all but ANZ crossing the 2% threshold on 4-year terms. But all four opted to keep variable rates, which typically move in line with the cash rate, unchanged.

According to Mozo Director Kirsty Lamont, the big banks are hoping to attract and retain borrowers with the capacity to meet ongoing repayments.

“As the pandemic drags on and the job market continues to take a beating, the decision by the nation’s biggest lenders to only cut some fixed home loan rates is a clear indication they are under pressure and looking to shore up their loan book,” she said.

Lamont advises borrowers to weigh their options carefully before locking in a fixed rate, especially considering the RBA has made clear that official interest rates will remain at record low levels for some time.

“Predictable monthly repayment might be tempting now, but borrowers should feel no urgency to lock in a rate,” she said. 

RELATED: Which banks have cut home loan rates following the November RBA cut?

Besides the new fixed rates from the big banks, the best value is to be found among smaller lenders such as Illawarra Credit Union (1.99% p.a. for 2 years, 2.93% p.a. comparison rate*) and Homestar (1.98% p.a. for 1 year, 2.41% p.a. comparison rate*). 

On the variable rate front, online lenders Athena and Homestar moved to cut rates immediately after the Reserve Bank’s decision, continuing a tradition that has been largely upheld by the two over the last six RBA rate cuts.

Currently, Reduce Home Loans offers one of the best variable rates at 1.99% p.a. (2.05% p.a. comparison rate*). Meanwhile, the lowest variable rate among major banks is 2.69% p.a., offered by Commonwealth Bank (2.70% p.a. comparison rate*) and NAB (2.69% p.a. comparison rate*).

To see how these stack up against other offers on the market, visit our home loan comparison page, where you’ll be able to filter your search by rate and type.

Home loan comparisons on Mozo - last updated 11 August 2022

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    Initial monthly repayment
    3.10% p.a. variable
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    Initial monthly repayment
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    3.06% p.a.

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    interest rate
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    Initial monthly repayment
    3.29% p.a. variable
    3.33% p.a.

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    <60% LVR, Owner Occupier, Principal & Interest

    interest rate
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    Initial monthly repayment
    3.79% p.a. variable
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* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate, loan amount and term entered. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

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