Major bank makes shock move on home loan rates amid RBA pause

While the Reserve Bank keeps us guessing, Westpac has made its play, positioning itself as the undisputed leader among the Big Four.

The banking giant has quietly provided a fresh interest rate cut for home loan borrowers despite the RBA holding the cash rate steady at 3.60 per cent last month.

The change means it now offers the lowest variable home loan rate out of the Big Four banks, having aggressively cut rates by 10 basis points on its Special Online Offer Flexi First Option Home loan.

The move brings the interest rate down to a razor-sharp 5.24 per cent (5.25 per cent comparison rate) for owner-occupiers with a 70 per cent Loan-to-Value Ratio.

Investor rates have also been slashed by a whopping 20 basis points, a clear siren call to property investors ready to expand their portfolios.

A Westpac spokesperson confirmed the move to Yahoo Finance and said the offer was now available for new home purchases, along with refinancers.

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Westpac has cut rates by 10 basis points on its Special Online Offer Flexi First Option Home loan.

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The bank is championing a “simple online option” backed by its virtual banking team, targeting loans from $350,000 with an LVR of 80 per cent or less.

Mozo’s Peter Terlato said the “significant change” marked a “notable increase in competition among the big banks”, as they look to retain and attract new customers.

“The battle for market share is heating up, with the banks also competing fiercely on fixed rates,” Terlato told Yahoo Finance.

“With the RBA in a holding pattern, this latest rate cut from Westpac could put pressure on the other majors to follow suit if they want to remain competitive with their headline rates.”

Indeed, Westpac’s new variable rate now leaves Commonwealth Bank’s Digi Home loan trailing at 5.34 per cent for owner-occupiers with a 40 per cent deposit.

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According to Canstar, the lowest variable rate for owner-occupiers among smaller lenders is 4.99 per cent, which is reserved for first-home buyers.

Those refinancing may be eligible for rates as low as 5.08 per cent.

Westpac’s latest adjustment follows the lender’s earlier decision to cut fixed rates by up to 0.7 per cent, making it the first major bank to offer a fixed rate under 5 per cent in the current cycle, with its lowest advertised fixed rate starting from 4.89 per cent for a two-year term for owner-occupiers with a 30 per cent deposit.

Meanwhile, the RBA is not expected to cut the current 3.60 per cent cash rate until early next year.