Australia's borrowers may have to wait weeks for Reserve Bank's rate cut to reduce their mortgage

The Guardian

19 hours ago

Mortgage rates will slide after the Reserve Bank announced a third interest rate cut of the year – but borrowers with some major banks may have to wait weeks for relief.
Lenders have lined up to reduce their rates by 0.25%, with 20 banks – including each of the big four – announcing on Tuesday that they will pass on the cuts but only two of them doing so immediately.
The third rate cut of the year will deliver a borrower with a $750,000 mortgage a further $111 off their monthly interest payments, once their lender passes it on, according to Canstar.
Only two of the banks to announce a cut on Tuesday delivered it the same day, leaving many customers waiting until late August for relief.
Mortgage holders at the four biggest banks are charged an additional $7.5m collectively in interest per day when mortgage rates remain 0.25% higher, Finder analysis has found.
NAB said it would pass on the cut 13 days after the RBA's move, longer than the 10 days it waited to hand down May's cut.
Westpac announced it would wait 14 days to pass on the 0.25% cut, while Commonwealth Bank and ANZ will wait 10 days, as each did in May.
One first home buyer, Andrew Giraldi, watched his banks' interest rate moves after the RBA's announcements and was glad to see his lender, Macquarie, commit to passing on the rate cut within three days.
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'My good mate is still waiting for NAB,' he said.
The 28-year-old and his partner, Joanna, bought a flat in February with a 6.19% variable rate from Macquarie, which will on Friday fall to 5.44%.
Each cut has saved them about $130 a month in repayments, with all three cuts amounting to nearly $400 saved each month compared with February. They have saved nearly $30 a week as Macquarie cuts rates within three days instead of 10.
The couple made sacrifices to buy a home in Ryde, midway between Sydney's CBD and Parramatta, even selling a car Giraldi had saved for and worked on for seven years.
'Every dollar makes a difference,' Giraldi said. 'That $30 could be worth double, triple that in the long run.
'I think it would take a few quickly passed-down rate cuts to get the race car back, but it's hopefully in my line of sights in the distant future.'
Variable rates have fallen by the same amount as the RBA's cash rate since the beginning of the year, despite the delays.
Complex systems and high numbers of customers contributed to delays in banks passing on interest rate changes, according to Sally Tindall, the data insights director at Canstar.
'It is a little bit frustrating, for their variable-rate customers who really just want that relief as quickly as they can get it,' she said.
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If banks passed Tuesday's rate cut on in full, the average rate for all variable owner-occupier loans would fall from its June level of 5.79% to 5.54%.
CommBank and Westpac's lowest variable rates fell to 5.34%, while about 30 lenders will offer variable rates of 5.25% or lower by the end of August, Canstar estimated.
Just one bank, Police Credit Union, was offering a 4.99% variable rate after the bank's decision, which it has offered since July, though Tindall said more lenders could offer sub-5% variable rates by the end of August.
'A variable rate that starts with a four is a fantastic marketing play, and so you might find that some lenders break that 5% barrier in order to attract new business,' she said.
It would take one more rate cut to see a crowd of banks offer rates as low as 5% and two more for major banks to reach that level, Tindall said. The RBA governor on Tuesday flagged two or three more rate cuts were on the table if inflation continued to ease.
Short-term fixed-rate loans have offered even lower rates than variable loans since September 2024, with 17 lenders offering a fixed rate under 5% ahead of Tuesday's cut.
The month leading up to the RBA's decision saw 20 banks cut one or more of their fixed home-loan rates, Canstar's database indicated.
Low fixed rates may not be the best loan but instead a sign of better deals to come, according to Richard Brown, owner of Mortgage Choice Epping.
'The banks are trying to front-run it by reducing their fixed rates … but what that tells most borrowers is that the variable rate's just going to come down even more,' he said.
CommBank and Westpac data indicates 99% of new loans since late 2024 have been on variable rates, as borrowers bet on further declines.
Easing interest rates have seen homebuyer loans rise almost $40bn from January to July while investor loans have jumped nearly $20bn, APRA data shows.