Over 50 Australian lenders have fully embraced the recent decision by the Reserve Bank of Australia (RBA) to cut the cash rate by 0.25 percentage points. This move will bring relief to borrowers, with the lowest advertised variable rate expected to be 5.64 per cent in the coming weeks.
The RBA’s decision marks the first rate cut since 2020, reducing Australia’s cash rate from 4.35 to 4.10 per cent. Following this announcement, more than 50 lenders, including major banks such as CBA, Westpac, NAB, and ANZ, have committed to passing on the rate cut to their customers.
Sally Tindall, the data insights director at Canstar, expressed her amazement at the number of lenders who have announced upcoming reduced variable rates. She believes that this development will bring much-needed mortgage relief to borrowers across the country.
Among the lenders, Australian Mutual Bank, Homestar Finance, and RACQ will offer the new lowest advertised variable rate of 5.64 per cent. ANZ will have the lowest variable rate among the big four banks at 5.84 per cent, followed by CBA at 5.90 per cent. NAB and Westpac’s new variable rates will be 6.19 per cent.
The rate cuts by CBA, NAB, and ANZ will come into effect on 28 February, while Westpac’s changes will start on 4 March. Tindall believes that the big four banks have set a precedent by passing on the rate cut, putting pressure on other lenders to follow suit.
While a 0.25-percentage-point rate reduction may seem small, Tindall emphasizes that it represents more than just savings. It suggests that the worst of the cost-of-living crisis may be behind us. Data shows that over 35 lenders are expected to offer at least one variable rate under 5.75 per cent, and more than 60 lenders will have at least one variable rate under 6 per cent. The estimated average variable rate for owner-occupiers is projected to be 6.07 per cent.
In terms of savings, a 0.25-percentage-point rate reduction translates to a monthly decrease of $92 for owner-occupiers with a $600,000 debt and 25 years remaining. Tindall acknowledges that while this cut provides a lifeline for some households, borrowers who can maintain the same repayment amount will benefit in the long run.
According to data, borrowers with a $600,000 debt and 25 years remaining could save nearly $90,000 in interest and four years over the life of their loans if they maintain the same repayment. Tindall advises borrowers to consider allocating any savings towards their home loan, as this will yield significant benefits in the future.
Furthermore, Tindall suggests that borrowers explore the option of haggling and refinancing their loans with lenders offering more competitive rates. While RBA governor Michele Bullock cautioned against expecting multiple rate cuts, Tindall believes that there could be four additional cuts in 2025. She encourages borrowers to consider refinancing to lenders with the lowest rates to potentially secure multiple rate cuts.
In conclusion, the recent rate cut by the RBA has been widely embraced by Australian lenders, with over 50 lenders committing to passing on the reduction to their customers. This move brings relief to borrowers, and the lowest advertised variable rate is expected to be 5.64 per cent. Borrowers have the opportunity to save significantly on their home loans and should consider exploring refinancing options to secure the most competitive rates available.
