Westpac cuts discounts on new home loans

Big four bank Westpac announced it would reduce discounts on several home loan packages by 0.2 basis points for new owner-occupiers and investors yesterday.

This follows in the footsteps of CommBank’s decision last month to slice 0.15 percentage points off various mortgage products.

While existing Westpac customers will not be affected, potential borrowers looking to switch home loans from a different provider will. The bank has just cancelled a $1,250 refinancing incentive.

A Westpac spokesperson told media the changes reflected higher funding costs, similar to reasons CommBank gave for cutting discounts in August.

"The challenge for banks when interest rates fall is to balance the benefit for mortgage customers, with loan rates at record lows, with the needs of depositors and shareholders, who provide the funding for those loans,” Westpac told the Australian Financial Review.

“Most of our funding comes from depositors, and with the structural changes that have occurred in recent years, regulators now require us to increase our reliance on deposits and on capital, relative to wholesale borrowing. Therefore our funding costs are higher."

Financial pressure on Westpac could also be due to the big four having pumped up term deposit rates for terms one year and over in August despite the RBA’s cash rate cut.

The good news is, that despite some lenders lessening discounts on home loans, there are still plenty of competitive rates to select from in the market. For instance, the lowest interest rate available to owner occupiers in our database is the Reduce Home Loans Platinum Rate Buster at 3.35%.

Whether you’re a budding investor looking to refinance or first home buyer, our home loans hub can help you save money through easy comparison.

*Product no longer exists (as of 18/12/2018)