Yahoo Finance Commonwealth Bank slashes interest rates after defiant RBA rate cut call: ‘Sweeping changes’
CBA has joined Westpac and NAB in cutting its fixed home loan rates, leaving ANZ the odd bank out.
Commonwealth Bank (CBA), Australia’s biggest home loan lender, has cut a range of fixed and variable mortgage rates for customers. The move comes after the major bank confirmed it was sticking to its forecast of a November rate cut from the Reserve Bank of Australia (RBA).
CBA cut fixed rates across its one, two, three and four-year terms by up to 0.70 per cent, while select new customer variable rates have dropped by up to 0.35 per cent. The bank's standard variable rate and rates for existing customers have been left unchanged.
The last Big Four bank to cut variable rates was NAB back in April this year but there has been a flurry of fixed-rate cuts recently. Westpac cut a range of fixed rates by up to 0.80 per cent this week, while NAB cut its three-year fixed rate by 0.60 per cent in July. But experts have told Yahoo Finance there were risks to consider before locking in a fixed rate.
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Canstar data insights director Sally Tindall said CBA’s “sweeping changes” were a bid to bring new business in the door.
“This move from Australia’s biggest bank will put heat on the rest of the market to make sure they’ve got competitive new customer home loan rates,” Tindall said.
“While these variable rate changes are only for new customers, there’s nothing stopping existing CBA variable mortgage customers from picking up the phone and asking for this rate cut.”
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CBA economists are still pencilling in a November interest rate cut, despite the RBA board ruling out a “near-term” cut in the next six months.
“We continue to side with market pricing and think it more likely than not we will see an interest rate cut by the end of the year,” head of Australian economics Gareth Aird said.
Aird said this is based on inflation moderating faster than the current RBA’s forecast and unemployment moving up a little quicker.
He acknowledged this "might look odd" and went against RBA governor Michele Bullock's comments.
Fixed interest rate tide turning
Tindall said the fixed-rate tide was “continuing to turn” as the cost of wholesale funding drops.
She expects ANZ will follow the move of the other three Big Four banks and sharpen its offering to keep up with the pack.
“It’s not just the big banks lowering select fixed rates. Over the last fortnight, a total of seven lenders have cut at least one fixed rate,” Tindall said.
“Despite this, most borrowers are opting to stay on a variable rate in anticipation of RBA rate cuts next year.”
Just 2.6 per cent of new and refinanced loans in June were fixed, the latest Australian Bureau of Statistics data found, one of the lowest levels on record and a huge drop from the 46 per cent recorded in July 2021 when rates were still at record lows.
Fixed rates can be risky
Mozo personal finance expert Rachel Wastell said a fixed rate could offer protection against rate hikes, but there was a risk you could miss out on savings from a potential rate cut.
"If the RBA cuts the cash rate and variable rates drop in response, the fixed rate that’s lower now could end up higher later on," Wastell told Yahoo Finance.
"On the other hand, sticking with a higher variable rate could mean paying more interest than a fixed rate while waiting for that first RBA rate cut."
Tindall said it was “highly likely” fixed rates had further to fall with more cuts expected in the coming weeks and months ahead, so it could be risky to fix your rate too early.
“A couple of RBA cuts could see many banks' lowest rates swing back to variable, potentially leaving those borrowers on a fixed rate high and dry on an uncompetitive rate,” she said.
When do the big four banks think interest rates will drop?
Commonwealth Bank: November 2024
Westpac: February 2025
ANZ: February 2025
NAB: May 2025
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