Homeowners could score an interest rate cut before Michele Bullock and the RBA hand down their November decision. (Source: Getty)
The Reserve Bank of Australia (RBA) is meeting in less than two weeks to decide whether to hike, hold or drop interest rates, but lenders are jumping the gun. Nine have adjusted their offerings in the last month, with some cutting by up to 25 basis points – the same as a typical RBA cut to the cash rate.
Canstar’s director of data insights, Sally Tindall, said some of these changes might not apply to a majority of homeowners. But she told Yahoo Finance why it’s still important for their situation.
“For people with a mortgage, they should definitely sit up and take notice,” she said.
“For starters, these are ‘new customer’ rate cuts, they’re not for loyal, existing customers. They don’t automatically apply to you, unless you pick up the phone, and haggle with your bank.”
She said the adjustments show there is still a massive amount of rivalry in the mortgage arena and lenders are jostling to get more customers.
“You can use this as evidence that there’s competition in the market, and when there’s competition, banks are often willing to hand out rate discounts that are sometimes lower than what they’ve got advertised on their website,” Tindall explained.
“Equally, a lot of banks are very keen to keep you as a customer, and might be able to hand you a rate cut with a bit of negotiating from your side.”
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Canstar’s analysis ranged from September 24 to October 21 and found nine lenders had cut their variable loans by 0.05 to 0.25 per cent.
Aussie: 0.25 per cent rate reduction, effective on October 15
P&N Bank: up to 0.25 per cent reduction
ME Bank: up to 0.19 per cent
Westpac: 0.10 per cent reduction
Bank of China: 0.10 per cent reduction
MOVE Bank: 0.10 per cent reduction
Bankwest: 0.10 per cent reduction
Queensland Country Bank: 0.05 per cent reduction
Bank of US: up to 0.05 per cent reduction
Westpac being in that pack was significant, Tindall noted, because it showed this competition is being felt even by the Big Four.
However she added that getting access to these rate cuts can depend on how much of a deposit a buyer has, with some requiring much more than the standard 10-20 per cent.
For instance, Westpac’s 10 basis point cut applied to it Special Online Offer Flexi First Option Home loan, taking the interest rate to 5.24 per cent (5.25 per cent comparison rate) for owner occupiers. But they’ll have to stump up a 30 per cent deposit.
Mortgage borrowers are seeing some relief, but they’ll need to be proactive, says Sally Tindall (Source: Canstar)
The Canstar expert said all eyes will be on the RBA next month when it meets to discuss interest rates.
Opinion is very much mixed amongst experts on whether the November 3-4 meeting will result in the fourth rate cut of the year.
Recent unemployment data caused some to believe a cash rate reduction was much more probable, but Tindall said the RBA will likely be relying more on quarterly inflation figures, out next week, to guide its decision.
“If you’ve got a mortgage, I wouldn’t bank on any RBA move as a certainty. There’s this huge question mark over whether the RBA will move again this year,” she told Yahoo Finance.
“A cut is definitely not in the bag at this point in time.”
She added that even if the central bank did cut interest rates from the current 3.60 per cent, it might not necessarily make a homeowner’s mortgage cheaper.
“We could potentially be getting close to a point where banks start thinking a lot longer and a lot harder about whether they’re going to pass it on in full,” she said.
“If some borrowers think, ‘I’ll just wait to see what the RBA does’, I would consider bringing that plan forward and striking while the iron is hot.
“You don’t have to wait to see what the RBA does to start haggling with your lender or considering refinancing to a different lender. If you’re on a variable rate and you get your own personalised rate cut, and then the RBA makes a move, then you hopefully will benefit from a double cut, rather than just a single cut.”
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