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Lenders drop rates despite cash rate hold

Reviewed by expert, David Koch
4 min read
24 Sep 2024

The cash rate may be on hold but that hasn’t stopped several lenders reducing their home loans offers, allowing savvy refinancers to create a rate cut of their own.

Compare the Market Economic Director David Koch said that some of the country’s biggest lenders had reduced their home loan rates over the past month, continuing a trend of cuts across the mortgage market.

Commonwealth Bank of Australia (CBA) lowered rates on its fixed and variable mortgages by up to 0.70%. The bank’s three-year fixed rate dropped from 6.59% to 5.89%.

Westpac also reduced its LVR <70% fixed rates to 5.89%, matching CBA’s new offering.

LenderRate typeNew offerReduction on old offer
Commonwealth BankThree-year fixed with wealth package5.89%-0.70%
WestpacTwo-year fixed rate <70% LVR5.89%-0.80%
ME BankThree-year fixed ≤80%5.79%-0.05%
St GeorgeFive-year fixed LVR 70%-80% 6.19%-0.75%
MacquarieTwo-year fixed with <70% LVR5.59%-0.30%

While the deals may be enticing, Mr Koch warned that borrowers who lock in a rate now could find themselves worse off if the RBA decides to reduce the cash rate later in the year.

“While these fixed rates south of 6% may seem tempting, if you can afford to hedge your bets, it may be worth waiting for a RBA cash rate cut,” Mr Koch said.

“Fixed home loans are great for shielding you from rate rises, but they will block you from taking advantage of a rate cut.

“Banks won’t reduce their fixed rates unless they think it’s a safe bet for them. The reality is rates could be a lot lower in four years’ time.

“History tells us it’s usually better to remain a bit flexible and consider staying on a variable rate when we’re at the peak of the cycle and rates are widely tipped to go down.

“Even though there wasn’t a cash rate cut today, seeing these fixed rates drop is a really good sign and an indicator one could be coming soon”.

This comes as a Compare the Market analysis found a 1.2% difference in some of the lowest advertised rates.

This means someone with $750,000 loan size could be saving $595 on their monthly repayments when they refinance from 7.24% to 6.04%.

Mortgage sizeThe difference between variable rates in the market
Minimum monthly repayments on variable P&I rate of 6.04% (HSBC)Minimum monthly repayments on variable P&I rate of 7.24% (ANZ)Difference in monthly minimum repayments
$500,000$3,011$3,408$397
$600,000$3,613$4,089$476
$750,000$4,516$5,111$595
$900,000$5,419$6,133$714
$1,000,000$6,021$6,815$794
Monthly repayments do not include any reduction in the mortgage balance over time. These calculations assume: An owner-occupied variable interest rate of 6.04% compared to 7.24% p.a; principal and interest (P&I) repayments; the loan term is 30 years; and there are no monthly fees.

 “With the cash rate at the highest level in over a decade, it’s extremely important to shop around to minimise the interest on your repayments as much as possible,” Mr Koch said. 

“There’s a dwindling number of lenders still offering $2,000 cashback for refinancers too.”

From the peak of 35 in March last year to five now – two of which are on Compare the Market’s home loan panel.  

“Some of the lenders that are still offering $2,000 or more in cashback include ME bank, Reduce Home Loans, Greater Bank, Newcastle Permanent and ANZ,” Mr Koch said. ME Bank is even offering a $3,000 cashback and their lowest advertised rate is 6.13%”.

“But be careful not to fall into a honey trap. Make sure the cashback deal is attached to a low rate, otherwise it may not be worth it.”

Compare the Market is also offering a $2000 bonus for new homebuyers and refinancers who apply and settle a loan before 31 December 2024.

The bonus can be combined and “stacked” with other offers available through the more than 17 lenders on Compare the Market’s lending panel. It could mean certain borrowers are able to get two bites of the cash back pie.

Head to Compare the Market’s website to see how your home loan interest rate stacks up. 

For more information, please contact:  

Natasha Innes | 0416 705 514 | [email protected]

 Compare the Market is a comparison service that takes the hard work out of shopping around. We make it Simples for Australians to quickly and easily compare and buy insurance, energy, travel and home loans products from a range of providers. Our easy-to-use comparison tool helps you look for a range of products that may suit your needs and benefit your back pocket.

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avatar of author: Natasha Innes

Written by Natasha Innes

Natasha Innes is a Media and Communications Advisor at Compare The Market. Natasha joins us after working as a journalist at the Courier Mail and Seven News. She graduated from Queensland University of Technology with a dual degree in Business and Journalism majoring in Public Relations.

[email protected]

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