How you can get a massive interest rate CUT on your mortgage despite fears there’s a lot more pain to come from the Reserve Bank
- Commonwealth Bank slashed mortgage rates for those with 40 per cent deposit
- Australia’s biggest home lender has lowest offset account rate of 4.57 per cent
- That’s a big drop from Commonwealth’s previous advertised rate of 6.6 per cent
- RateCity research director Sally Tindall said this could see other banks follow
Australia’s biggest home lender, the Commonwealth Bank is offering a huge discount on mortgages despite predictions of more interest rate rises.
But the catch is borrowers must have a hefty 40 per cent home loan deposit instead of the usual 20 per cent deposit.
As of Monday, new Commonwealth Bank borrowers paying off principal and interest with a Wealth Package loan are being offered a mortgage rate of just 4.57 per cent.
Among the big banks, the Commonwealth Bank now offers the lowest variable mortgage rate with an offset account, where borrowers with more savings in the bank pay interest on a reduced loan amount.
The new loan rate represents a sizeable 2.03 percentage point drop from the previously advertised offset rate of 6.6 per cent – but for this privilege, owner-occupier borrowers have to pay an annual $395 fee.
Australia’s biggest home lender the Commonwealth Bank (branch pictured) is offering a huge discount on mortgages despite predictions of more interest rate rises. Borrowrs
It is also lower than the more common 4.79 per cent Commonwealth Bank mortgage rate for borrowers with a 20 per cent deposit with no offset account.
RateCity research director Sally Tindall said the Commonwealth Bank’s latest slashing of mortgage rates could see the other banks also publicise special discounts to less risky borrowers.
‘For years, the big banks have been offering up special discounts to select customers that others can’t see,’ she said.
‘This move from CBA is hopefully a step closer to the end of this cloak of secrecy.
‘These discounts will help Australia’s biggest bank shore up its loan book with rock solid borrowers who are well-placed to be able to withstand the pressures that come with rising rates.’
By comparison, ANZ’s lowest equivalent rate is 5.74 per cent for borrowers with a 20 per cent deposit, with a $120 yearly fee.
Westpac has a 5.94 per cent mortgage offset rate for those with a 30 per cent mortgage deposit, and a $395 annual fee.
RateCity research director Sally Tindall said the Commonwealth Bank’s latest slashing of mortgage rates could see the other banks also publicise special discounts to less risky borrowers
NAB offers a 6.37 per cent mortgage rate for loans of $750,000 or more with an annual $395 fee.
What the major banks now expect
ANZ: 3.85 per cent cash rate by May 2023
WESTPAC: 3.85 per cent cash rate by May 2023
NAB: 3.6 per cent by March 2023
COMMONWEALTH: 3.1 per cent by December 2022
‘Westpac, NAB and ANZ will now be under pressure to drop the advertised prices on their package home loan rates, which are now significantly higher than what’s on offer from their biggest competitor,’ Ms Tindall said.
Smaller banks, however, offer lower mortgage rates linked to an offset account than the Commonwealth Bank.
Auswide Bank has the lowest advertised rate of 4.26 per cent for those with a 25 per cent deposit, charging a $395 annual fee.
Borrowers with all kinds of variable rates are in for more pain with economists expecting more interest rate rises from the Reserve Bank of Australia, with annual inflation in the September quarter at a 32-year high of 7.3 per cent.
This is more than double the RBA’s two to three per cent target.
The Commonwealth Bank is expecting the Reserve Bank in December to raise the cash rate to a new 10-year high of 3.1 per cent, up from an existing nine-year high of 2.85 per cent.
Westpac and ANZ are forecasting an 11-year high cash rate of 3.85 per cent by May, while NAB is forecasting a 3.6 per cent cash rate by March 2023.