Major Banks Adjust Home Loan Rates as Market Conditions Shift

Australia’s biggest banks are adjusting their home loan rates outside the usual cycle, with the Commonwealth Bank of Australia (CBA) leading the charge by cutting both fixed and variable rates for new borrowings.

As of August 23, 2024, CBA has implemented reductions for new loans, impacting both broker and direct customers. The bank has lowered its variable rates by up to 35 basis points and its fixed rates by up to 70 basis points. Notably, the largest cut affects new owner-occupiers taking out a three-year fixed-rate loan, which is now set at 5.89% for principal and interest repayments. However, these new rates are not available to existing customers.

A CBA spokesperson explained that the rate changes are part of an ongoing review of interest rates and market conditions. They emphasized the bank’s commitment to helping Australians find a home and encouraged potential borrowers to use the CommBank app or consult with their lender or broker.

In a similar move, Westpac announced on August 21 that it is reducing fixed rates by up to 80 basis points for both owner-occupiers and investors. This adjustment brings Westpac’s lowest fixed rates for two-, three-, four-, and five-year terms down to 5.89% for customers with a loan-to-value ratio (LVR) of 70% or less. New customers with low LVRs might also benefit from an additional 10-basis-point discount.

These changes come after the National Australia Bank (NAB) adjusted its fixed rates in July, even though the official cash rate has remained steady at 4.35% since November 2023. ANZ is the last of the major banks to make adjustments to its fixed rates outside the official cash rate movements.

This wave of rate changes by the banks contrasts with recent statements from the Reserve Bank of Australia (RBA). RBA Governor Michele Bullock has indicated that it is premature to consider lowering the cash rate, as inflation remains a concern. Despite this, Gareth Aird, CBA’s head of Australian economics, anticipates a reduction in the cash rate during the November meeting, with other major banks predicting the first cut to occur in February 2025.