CBA moves on interest rates but many miss out
Borrowers should expect rock-bottom interest rates through until 2023 after the cash rate was slashed on Melbourne Cup Day.
But the Commonwealth Bank was the first of the big four banks to move on Wednesday, dropping many fixed rate deals but leaving variable loan customers out in the cold.
CBA has cut its fixed-rate loans including lowering its four-year fixed rate mortgage for owner occupiers paying principal and interest by 100 basis points to 1.99 per cent.
That rate is the lowest home loan ever advertised by the 109-year-old lender.
CBA has also cut its two and three-year fixed rate home loans for owner occupiers paying principal and interest by 15 basis points to 2.14 per cent.
One-year fixed rate loans for owner occupiers paying principal and interest have been cut by 15 basis points to 2.19 per cent.
The failure to drop its benchmark standard variable rate comes despite pleas from RBA governor Philip Lowe and Federal Treasurer Josh Frydenberg to pass on the cuts to borrowers.
The Reserve Bank of Australia board cut the cash rate on Tuesday by 0.15 percentage points to a record low of 0.1 per cent which will save borrowers with a $400,000 loan about $35 per month.
But savers will again be the ones who suffer after already experiencing years of dismally low rates.
RBA governor Philip Lowe said the cash rate cut follows a period of high unemployment - the rate is 6.9 per cent - and said the central bank was committed to helping support job creation.
He urged borrowers to take action if their lender failed to pass on Tuesday's cash rate cut.
"I would expect and hope that these interest rate cut reductions get passed through to all borrowers," Dr Lowe said.
"The best outcome would be for standard variable rates to be lowered and if that doesn't occur I am confident there will be pass through occurring through people renegotiating and switching."
Dr Lowe said borrowers should take matters into their own hands and "go and ask their bank for a better deal" if they failed to budge.
"Ask them and if they don't give it to you switch to a bank that will," he said.
Canstar's database shows the lowest owner occupier one-year fixed rate is 1.77 per cent by Reduce Home Loans.
And for variable rate loans the cheapest rate is by Homestar Finance.
This is for borrowers with a loan-to-value ratio of 60 per cent or less - the rate is now 1.79 per cent.
Aussie chief executive officer James Symond said mortgage costs had never been cheaper and said it was a great time for borrowers to take advantage of the deals to help pay off their debt faster.
"For new and existing customers shopping around is more important than ever before to ensure they are getting the most competitive product and deal possible," he said.
"Customers should be proactive, some lenders might not even move.
"You need to know what the fees are to switch to a new loan and what will be the savings over a remaining loan term."
He said some borrowers could even have home loan rates that start with a "1".
Financial comparison website Mozo's spokeswoman Kirsty Lamont also urged borrowers to compare other deals.
"There are ways to save on your home loan repayments and if you're bank won't help you do it it's time to move," she said.
"We are already seeing rates drop below two per cent for owner occupier borrowers so if you are paying more than 2.5 per cent on your home loan it's time to review that rate and get yourself a better deal."
But savers have been hit yet again as their long-running stretch of dismal returns on savings accounts continues - some are less than one per cent.
Dr Lowe said: "We understand their pain.
"The harsh and unfortunate reality here is you are going to get a low return on your savings.
"The solution is to get businesses to invest and to have other individuals want to use their income to spend rather than save."
But the decision came with some staunch criticism from former Labor prime minister Paul Keating who issued a statement slamming the RBA's decision.
"The Reserve Bank has arisen from its monetary slumber and its long, fruitless search for the inflation dragon," he said.
"The bank's inflation obsession should be moderated by a switch to 'actual' and not 'forecast' inflation, which the Bank has been so wedded to."
Loan amount Pre-cut monthly repayments Post-cut monthly repayments Monthly savings
$300,000 $1522 $1495 $27
$400,000 $2029 $1994 $35
$500,000 $2536 $2492 $44
$700,000 $3551 $3489 $62
$1 million $5073 $4984 $89
Source: Mozo.com.au, based on the big four banks' average standard variable rate at 4.51 per cent.
Originally published as Banks yet to pass on RBA's historic rate cut