Banks drop variable mortgage interest rates

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All of Australia’s big four banks have now announced their interest rate cuts following last week’s official cash rate drop by the RBA, and second tier lenders have followed suit. How far have your bank’s rates dropped, and what does this mean for your repayments?

ANZ was the only big four lender follow the Reserve Bank, dropping rates by the full 0.25% to 6.8%. Westpac followed with a 0.2% cut to take its rate to 6.89%, and CBA moved by 0.21% to drop its standard variable rate to match ANZ’s 6.8%.

NAB, however, has managed to retain its spot as cheapest among the majors. The bank mirrored CBA's move of 0.21%, taking its standard variable rate to 6.78%. NAB group executive of personal banking Lisa Gray said the bank remained committed to having the lowest rate among the majors.

"These are always difficult decisions to strike the right balance between our mortgage holders and our deposit holders but we will continue to have the lowest standard variable home loan rate of the major banks for 2012 – as we have for the past 35 months," she said.

So what does this mean to you? Below is a table summarising pre- and post-rate cut monthly repayment amounts based on a $300,000, Principal & Interest, 25-year mortgage. Calculations were made using the Your Mortgage basic repayment calculator.

Pre-cut

 

 

Rate

Repayments

Total interest paid

CBA

7.01%

$2,122.25

$336,675.00

ANZ

7.05%

$2,129.92

$338,443.00

Westpac

7.09%

$2,137.59

$341,277.00

NAB

6.99%

$2,118.42

$335,526.00

Post-cut

 

 

Rate

Repayments

Monthly saving

Total interest paid

Total interest saving

CBA

6.80%

$2,082.22

$40.03

$324,666.00

$12,009.00

ANZ

6.80%

$2,082.22

$47.70

$324,666.00

$13,777.00

Westpac

6.89%

$2,099.33

$38.26

$329,799.00

$11,478.00

NAB

6.78%

$2,078.42

$40.00

$323,526.00

$12,000.00

 

Second tier lenders have also announced rate cuts, but so far only one has passed on the full 0.25% cut announced by the RBA.

Bank of Queensland last week became the first bank to move in the wake of the Reserve Bank's cut, passing on the full 0.25%. St. George has trimmed 0.18% from its standard variable rate, taking its rate to 6.86%. The move leaves the bank's rate 0.03% lower than its parent company Westpac, but higher than the other majors. Bank of Melbourne has also announced cuts, dropping its rate by 0.19% to 6.8%.

ING DIRECT pre-empted moves by the majors last week, cutting 0.2% from its rates to bring the lender's Mortgage Simplifier variable rate loan to 6.22%.

Suncorp has also reduced rates, cutting its standard variable rate by 0.2% to 6.88%. ME Bank has passed on the smallest reduction so far, cutting rates by 0.16%, but chief executive Jamie McPhee has argued that the lender's rates are more than 0.5% lower than those of the nearest major bank.

"The major banks have decreased their rates by less than 0.62% p.a. between November 2010 and June 2012, while ME Bank has decreased its rates in the same period by 0.71%," he claimed.

Are you considering your home loan options? Visit Your Mortgage for a home loan comparison, or why not start a thread in the mortgage & finance section of our property investment forum?

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