New Auswide Bank home loan will track RBA cash rate

Monday 17 October 2016

Article by Roisin Kelly-Goldsmith

An Auswide Bank home loan promising to reflect future RBA cash rate changes has entered the market for owner-occupiers today. There is one catch - if the cash rate falls to 0% or below, customers will be charged interest at a fixed margin instead.

An Auswide Bank home loan promising to reflect future RBA cash rate changes has entered the market for owner-occupiers today.

Dubbed “RBA Rate tracker”, the variable interest rate product with a comparison rate of 4.01% is designed for loan amounts of $150k and up. Homeowners with a loan to value ratio of 80% looking to refinance are also eligible.

Similar types of home loans, known as “tracker mortgages” are popular in Europe and the UK, but rarely offered in Australia. The last rate tracker product on the Mozo database, offered by QT Mutual Bank wound up last year.

Auswide Bank’s Managing Director, Martin Barrett, noted there was a gap in the market that needed to be filled.

“As a small nimble bank focused on meeting a range of customer segment needs, we identified an opportunity to create this new product,” he said.

Barrett added that the new home loan would suit borrowers who prefer variable rates, “but value certainty and transparency about how much they will pay for their home loan and when interest rate changes will be passed on”.

Amid August’s RBA cash rate cut, Mozo data revealed that the “big four” pocketed over $132 million each day they delayed reducing rates on their home loan products. In comparison to the 20 days it took the big four banks, Auswide Bank has pledged that its new home loan will reflect future RBA rate changes within a mere two working days.

However, Barret reminded that the rate tracker loan is “not strictly tied to the RBA cash rate yet”, as the bank still needs to “maintain a competitive overall operating margin” to pay depositors and investors.

Auswide Bank’s RBA Rate tracker loan will cost customers $300 to establish, and they’ll be required to have an existing transaction account or sign on for one with the bank.  

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