Another lender weighs into the variable rate battle

Lenders might be raising their fixed interest rates, but variable rates continue to be slashed, with ANZ becoming the latest bank to cut its basic variable home loan.

Today, Australia’s fourth biggest bank announced it would slash its basic variable rate by up to 20 per cent, joining numerous other lenders who have cut at least one variable rate in the past three months.

ANZ’s rate cuts are for new customers with deposits of more than 20 per cent, with the biggest discount going to borrowers with deposits of 30 per cent or more.

Changes to ANZ Simplicity Plus variable loan – owner occupiers

Deposit sizeOld rateNew rateChange
30% deposit (LVR 70%)2.29%2.19%-0.10%
20% deposit (LVR 80%)2.49%2.29%-0.20%
Source: Note: Rates are for owner-occupiers paying principal and interest. Rates are based on a discount to the standard variable rate.

The move comes after continued pressure on lenders to cut their lowest variable loans, as competition in the market drives these rates down, despite rising fixed rates.

The database shows that in the past three months, 65 lenders have cut at least one variable rate.

Most cuts have been to lenders’ ‘no frills’ variable loans and for new customers only. The exception is Athena, which this week cut its lowest variable rates for new and existing customers.

Lenders that have moved at least one rate in the last three months

Rate typeLenders that have cutLenders that have hiked
1-year fixed2260
2-year fixed1175
3-year fixed181
4-year fixed249
Source: Date range is 20 Oct 2021 to 19 Jan 2022. Note some lenders have moved more than one rate. There are now significantly more variable rates under 2 per cent than fixed, with 72 variable rates under 2 per cent and just 42 fixed. Source: Research Director, Sally Tindall said ANZ was trying to chase down its big four bank competitor Westpac.

“Fixed rates might be on the rise, but competition in the variable rate market is still alive and kicking,” she said.

“For months Westpac has had the lowest variable rate out of the big four. ANZ has now thrown down the gauntlet in a bid to win new customers, matching Westpac’s lowest variable rate of 2.19 per cent.

“Variable rates are following a very different trajectory to fixed rates, at least for now.

“There are 72 variable rates under 2 per cent, however, for most borrowers there’s a catch.

“The vast majority of these variable rate cuts are reserved for new customers, so anyone looking for a rock bottom rate will have to consider switching lenders, or at least haggle with their current bank.

“The one notable exception is low-cost lender Athena, which cut its variable rates this week, not just for new customers but for existing ones as well.

“That’s a rare act in the mortgage market, particularly when there’s been no move to the cash rate for over a year.

“We expect variable rates will continue to fall over the next couple of months, however, as we get closer to the next cash rate hike, some lenders could move ahead of the RBA, particularly if the cost of funding continues to soar.”

Lowest big four bank owner-occupier home loan rates

Rate typeCBAWestpacNABANZ
1 yr fixed2.54%2.34%2.54%2.39%
2 yr fixed2.69%2.49%2.69%2.59%
3 yr fixed3.14%2.89%3.14%2.99%
4 yr fixed3.34%3.19%3.34%3.39%
5 yr fixed3.59%3.39%3.59%3.59%
Source: Note: Some loan-to-value ratio requirements apply.

Lowest variable rates on the database

LenderDeposit size requiredAdvertised rate
Reduce Home Loans20%1.77%
Homestar Finance40%1.79%
Pacific Mortgage Group40%1.79%
Well Home Loans40%1.82%
Freedom Lend40%1.84%
Source: Note: Rates are for owner-occupiers paying principal and interest.

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