‘Psychological: Banks slash interest rates out of cycle with RBA cash rate calls

News.com.au

10-05-2025

Australian mortgage holders could benefit from cheaper rates, as competition between the banks sees rates fall below a key psychological barrier.
ANZ has become the latest bank to make a move on interest rates outside of the RBA's cycle, reducing its fixed rate offering to 5.39 per cent for two years.
Friday's sweeping cuts by ANZ mean the bank now offers the lowest one and two-year fixed rates among the big four banks, while NAB has the lowest three, four and five-year fixed rates, after cutting on April 11.
These fixed rates are for owner-occupiers paying principal and interest.
But in a huge coup for mortgage holders, BOQ and Police Bank both announced new fixed rates at 4.99 per cent breaking through the 5 per cent barrier.
Canstar data insights director Sally Tindall while a rate of 5.39 per cent isn't likely to turn many heads, with variable borrowers across the country hanging out for further cash rate cuts, a fixed rate of 4.99 per cent might grab attention.
'A mortgage rate starting with a '4' is a crucial threshold psychologically that could prompt some borrowers to give up their seat on the variable rate rollercoaster. However, by doing so they would be giving up the potential for further cuts in the fixed-rate term,' she said.
'If you are weighing up the option of fixed versus variable, understand what might suit your finances better and make sure you spend time shopping around for a competitive deal.'
Ms Tindall said ultimately, this rate slashing is good news for borrowers.
'Two of the big four banks have cut fixed rates within a month of each other and we expect more banks to follow suit, however, lenders will probably have to consider fixed rates in the '4's if they want to get traction,' she said.
The move from the financial institutions comes despite the Reserve Bank of Australia holding the official cash rate at 4.1 per cent after April's meeting.
The Reserve Bank is widely predicted to cut interest rates by 25 basis points, to 3.85 per cent after they meet on May 19- 20.
It comes days after Australia's largest mortgage lender, CBA, made its move on variable interest rate loans to new customers.
Wednesday's move by the major bank will see it lower its owner-occupier, principle and interest variable rate loans to 5.84 per cent, in line with Westpac and ANZ.
The new home loan rate comes with a few caveats, including it being a digital-only home loan, a 40 per cent deposit and it will only apply to new customers, with existing mortgage holders missing out unless they refinance.
Despite the cheaper rates only applying to new customers, Canstar data insights director Sally Tindall described the new rates as 'fantastic' news for mortgage holders.
'This move is fantastic for competition because when Australia's biggest bank cuts its home loan rates it forces other lenders to sit up and take stock of their own,' she said.
'While this new lowest rate from CBA of 5.84 per cent is only for new customers with a 40 per cent deposit, it does not stop existing CBA customers from using this offer as a bargaining chip for their own rate negotiations.'