Westpac slashes loan as prospect of rate cut grows

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WESTPAC has answered to the Commonwealth Bank’s challenge, cutting its fixed rate home loan for the second time this year, to win over new customers.

Westpac has slashed the fixed rate for owner occupier and investor home loans by up to 0.20%, responding to the CBA’s decision to cut its loan by 0.30% earlier in the week.

ANZ is the only one of the big four banks to have not cut its fixed rates this year.

Ratecity’s research director Sally Tindall said 40 lenders have now cut fixed rates on around 450 products since the beginning of the year.

However, Tindall noted that borrowers are reluctant to lock in their loans right now because the prospect of the Reserve Bank of Australia cutting the official cash rate is growing.

“But with a rate cut on the horizon, potentially in the second half of 2019, Australians are reluctant to lock in their rate.

“This week’s housing finance data shows just 16.2% of new loans taken out are fixed,” she said.

“Other banks were likely to continue to slash fixed rates, especially now the nation’s biggest two banks had moved in the space of a week.

“Right now, the banks have one eye on the possibility of a rate cut and the other on securing new customers. As a result, more than 40 lenders have dropped their rates since the beginning of the year,” she added.

Amidst all the banks cutting loan rates, economists are also tipping that the Reserve Bank of Australia will cut interest rates as early as August.

Capital Economics’ economists Marcel Thieliant and Ben Udy predict the official cash rate will fall to as low as 0.75% by the middle of next year, whilst AMP Capital chief economist Shane Oliver said it will be 1% by the year end.

Westpac’s fixed rate loan products.

Owner occupiers, principal and interest

Term Old rate New rate Change
3 year 3.89% 3.79% -0.10%
4 year 4.29% 4.09% -0.20%
5 year 4.19% 4.09% -0.10%

Investors, principal and interest

Term Old rate New rate Change
2 year 3.95% 3.89% -0.06%
3 year 4.19% 3.99% -0.20%
5 year 4.49% 4.39% -0.10%

Australian Property Journal