How first home buyers are affected by rate changes
Last Tuesday the 2nd August the Reserve Bank of Australia (RBA) cut the official cash rate to a record low of 1.5%. Whilst the cut was widely expected my leading economists, many Australian’s are surprised by the new interest rates announced by some of the nation’s largest lenders.
Unfortunately the Big 4 Australian banks have only provided limited relief to borrowers by not passing on the full 0.25 basis point cut. Their decisions have been attributed to the cost of funding pressures that have been brought about by the stronger regulatory requirements.
However there is some good news for borrowers and aspiring first home buyers. Non-bank lenders are not subject to many of these stricter regulations that are increasing the costs of funding for the big banks. Therefore, some of the smaller and mid-tier lenders have been able to pass on a greater portion or even the full 0.25 basis point cut to introduce some interest rates not seen before.
FHBA Co-Founder Taj Singh believes competition will increase as a result. “The big 4 bank’s reluctance to pass on the full RBA cut may open the home loan sector up to even more competition, which is great news for aspiring first home buyers, as many lenders will be fighting to win their first home loans”.
The Big 4 Banks Home Loan Rates Changes
On the back of the RBA announcement last week, the big 4 Australian banks have announced the following changes to their standard variable home loan interest rates:
- Commonwealth Bank – cut by 0.13% to 5.22% p.a.
- NAB – cut by 0.1% to 5.25% p.a.
- ANZ – cut by 0.12% to 5.25% p.a.
- Westpac Bank – cut by 0.14% to 5.29% p.a.
FHBA Broker Ray Simpson, who helps first home buyers across NSW, finds it remarkable that all big 4 bank’s interest rates are extremely similar. “Not one major bank reduced their Standard Variable Interest Rate by the full 0.25%. Is that collusion? Other home loan lenders have reduced their home loans by the full amount, and in doing so, have created a marketing advantage” Mr Simpson said. Stay tuned for Ray Simpson’s expert piece later this week.
Which lenders will pass on the full RBA cut?
This is a question to ask your mortgage broker. FHBA Broker’s have access to the latest rates to advise you on a range of home loan options.[ARForms_popup id=182 desc=’Please click here if you would like to talk an FHBA Broker for a complimentary, no obligation chat to determine what interest rate you may be eligible for’ type=’link’ height=’auto’ width=’600′ overlay=’0.6′ is_close_link=’yes’ modal_bgcolor=’#e8e8e8′]
Deposit savers actually win!
Surprisingly, the news is not all that bad for aspiring first home buyers, with the Big 4 banks announcing increases in their deposit rates on some Term Deposit products. The unprecedented move may again be due to the banks facing regulatory and rising funding costs, which forces them to remain attractive to savers.
FHBA Co-Founder Daniel Cohen said “the increase in deposit rates will be welcomed by aspiring first home buyers that are still trying to put a deposit together”.
The Big 4 Banks Term Deposit Announced Changes
- 1 year fixed rate – up 0.6% to 3% p.a.
- 2 year fixed rate – up 0.75% to 3.2% p.a.
- 1 year fixed rate – up 0.5% to 3% p.a.
- 2 year fixed rate– up 0.5% to 3.1% p.a.
- 8 month fixed rate– up 0.85% to 2.9% p.a.
- 1 year fixed rate – 0.5% to 3% p.a.
- 2 year fixed rate – up 0.45% to 3.1% p.a.
Stay tuned for another FHBA blog later this week where we will highlight what other features aspiring first home buyers should consider when applying for their first home loan.
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Disclaimer: The rates quoted in the story were based on figures obtain from the banks. Some rates will not take effect until later this month. For the latest rates please check your local bank or ask your Mortgage Broker.