CBA and ING join mortgage rate cut rush

Two of Australia’s largest lenders, Commonwealth Bank and ING, have joined the growing list of lenders which have recently reduced variable home loan rates after announcing cuts last Friday.

The Commonwealth Bank made a number of rate changes, but the major move was to the variable rate available on its Extra Home Loan which the bank reduced by 74 basis points to a new low of 2.39% p.a. (2.40% p.a. comparison rate*) for owner occupiers (70-80% LVR).

“It’s a big play by the Commonwealth Bank to drop a rate down towards the pointy end of the market, although the fact that they’re targeting relatively low risk borrowers suggests that they’re being quite cautious,” says Mozo Banking Expert, Peter Marshall.

“Yes there are better rates out there, but for people who want to go with a big bank, it’s pretty sharp. The Extra Home Loan doesn't have an offset account though, so if you’re after a full-feature loan, it won’t be for you.”

The Extra Home Loan rate is now the lowest comparable ongoing variable rate on offer from one of the big four, though it’s worth noting that Westpac’s Flexi First Option Home Loan currently comes with a 24-month introductory rate of 2.09% before reverting to 2.59% p.a. (2.52% p.a. comparison rate*). 

Big four lowest variable rates (owner occupied, <80% LVR) - October 18, 2021

Meanwhile ING, which is one of the largest mortgage lenders outside of the big four, cut its Mortgage Simplifier and Orange Advantage (Package) rates by 25 basis points each.

That means the lowest variable rates available for owner occupiers (<80% LVR) are now 2.24% p.a. (2.27% p.a. comparison rate*) with the Mortgage Simplifier and 2.29% (2.64% p.a. comparison rate*) with the Orange Advantage (Package).

CBA and ING aren’t alone in having recently reduced variable rates though, as the likes of Bank Australia, Bendigo Bank and UBank have all made reductions to their respective home loan rates since October 1.

How low can variable rates go?

Of course, this isn’t a new trend - home loan rates have been on a downhill trajectory for a few years now. Since October 2018, the average variable rate in the Mozo database for an owner occupier (80% LVR, principal and interest repayments) has fallen from 4.35% to 3.14%.

And that’s just the average. Right now there are 32 lenders, including many larger banks, in the Mozo database offering at least one home loan (owner occupied, 80% LVR) with a headline variable rate under 2.30%.

Lowest variable rates Mozo database (owner occupied, <80% LVR) - October 18, 2021

The big question though is how long variable rates will continue to stay this low? According to Marshall, it’s unlikely that we’ll see dramatic changes any time soon.

“There are no signs yet that the Reserve Bank is going to bring forward the cash rate increase. The RBA seems confident that there aren’t going to be any inflationary issues, so that gives lenders a bit more confidence to continue to sharpen up their variable rates,” he says. 

“When you look at deposit accounts, which make up part of the cost of funding, banks continue to cut those rates. So as they erode the cost of deposits further and further, banks have more wiggle room to cut their mortgage rates - especially for groups of ‘safer’ borrowers such as prime owner-occupiers with lower LVRs.”    

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Looking to take out a new mortgage, or perhaps you’re looking to make the most of the low rates currently on offer to refinance your existing loan? Well if you’re looking to compare loans from a range of lenders all in the one place then there’s only one place to start: the Mozo home loan comparison hub.