Westpac mirrors CBA with no cut for variable rate customers

Australia’s second biggest bank has followed CBA, announcing it will not be passing on the rate cut to its existing variable rate customers, opting to cut fixed rates instead.

Westpac home loan rate changes – based on a loan-to-value ratio of under 70%

Note: the above rates are for owner occupiers paying principal and interest based on a loan balance of $400K. Based on an LVR of under 70%

Missed savings for existing Westpac variable customers

Notes: based on an owner occupier paying principal and interest over 30 years with a $400K loan. Based on a LVR of 70%.

RateCity.com.au research director, Sally Tindall, said Australia’s two biggest banks had served up some sour news to their variable rate mortgage customers.

“Governor Lowe has said he believes this rate cut will be passed through as people refinance or renegotiate their home loan, but he’s forgotten about the thousands of Australians who aren’t in a position to do so,” she said.

“These are the people who need this rate cut, but based on the response from the banks so far, they’re precisely the ones who are going to miss out.

“Anyone who’s lost their job, or on a mortgage deferral or who simply don’t have enough equity in their loan to refinance are in mortgage prison. They can’t switch lenders. They either have to stick on a high variable rate or fix with their current bank.

“Westpac now has the lowest fixed rate loan in Australia currently.

“These are cracking new fixed rates from the big banks which can potentially save the average mortgage holder hundreds of dollars a month, but only for customers willing to fix.

“If you are on a mortgage deferral, looking to sell your property in the next few years or looking to get ahead on your mortgage then it’s unlikely a fix rate is going to suit you,” she said.

Tips for variable rate customers

• Ask your bank for a rate cut. Check what they are offering new customers and if you are paying more, ask them to match it.
• Consider refinancing. If you want to stay on a variable rate and are in a position to switch lenders, there are rates as low as 1.77 per cent, particularly for people with a decent amount of equity.
• Consider a fixed rate. Remember – fixing comes with strict terms and conditions and typically won’t let you get significantly ahead on your repayments.

Extra repayments – fixed rate caps from the big four banks

CBA: up to $10,000 per year

Westpac: up to $30,000 per fixed rate term

NAB: up to $20,000 per fixed rate term

ANZ: ANZ: 5% of the loan balance or $5,000 per year, whichever is less. (The 5% is calculated at the start of the fixed period).

Things to consider before fixing

• Will I want to make extra repayments? Most banks have caps on how much extra you can repay while on a fixed rate.
• Do I need an offset account? Most banks don’t offer an offset account on their fixed rates.
• Will I need to get out of the loan early? There can be hefty break fees if you do.
• What is the revert rates? If you do fix, make a note of when the fixed term ends so you can negotiate a lower variable rate, refix or refinance. If you set and forget your fixed rate for the long term it could end badly.

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