The Reserve Bank cut the official interest rate to 0.1 per cent from .25 per cent on Tuesday and urged people to switch lenders if the banks failed to pass on the cuts. About 70 per cent of the CBA’s home loans are on variable terms.
The CBA cut its four-year, fixed rate loan to 1.99 per cent, a reduction of 100 basis points. The loan is only available to owner-occupiers who repay principle and interest. The bank said the rate was the lowest it had ever offered.
Accoding to the Federal Government’s Money Smart loan guide, the average loan was at 2.64 per cent. Most banks didn’t pass on the previous rate cut to variable home loans.
There are currently around 10.3 million properties in Australia and of these six million have mortgages against them.
CBA group executive of retail banking Angus Sullivan said the move by the Reserve Bank would lower the structure of interest rates and provide confidence that Australians can borrow over the long term at historically low rates.
“We have reflected this in our interest rate settings offering customers our lowest ever fixed rate … providing customers who fix some or all of their home loan with certainty and confidence,” he said.
The bank’s two and three-year fixed rate loans will fall to 2.14 per cent for owner-occupiers paying principle and interest.
Business loans have also fallen to 2.99 per cent for secured loans and 3.99 per cent for unsecured. The rate is available to borrowers through the Government’s SME loan guarantee scheme.
Its three, four and five year fully secured BetterBusiness loans have fallen 50 basis points to 2.49 per cent.
Westpac said its four year fixed rate would be 1.99 per cent for owner-occupied customers on principal and interest repayments with a Premier Advantage Package.
A fixed interest rate of 2.09 per cent will be offered for one, two and three-year terms for owner-occupied customers on principal and interest repayments with a Premier Advantage Package.
For business borrowers that are eligible for the Government’s Coronavirus SME Guarantee Loan Scheme, Westpac will offer a fixed interest rate of 2.38 per cent for terms of three to five years, a reduction of up to 0.56 per cent.
For new, fully secured business loans Westpac’s variable rate will be 3.09 per cent.
Westpac acting chief executive of the consumer division Richard Burton said the changes meant customers would be able to access even lower interest rates on our home loan and small business loans.
“However, we are in an extraordinary period with the official cash rate at a historical low and unconventional monetary policy measures in place. It is critical we carefully manage interest rate changes, while continuing to do our part in supporting customers and the economy,” Mr Burton said.