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Home loan rates tumble in the last 6 months, despite no RBA cut

Home loan rates tumble in the last 6 months, despite no RBA cut

Australia’s banks have continued to cut home loan rates for new customers, despite no RBA cash rate move in the last six months.

Ahead of tomorrow’s RBA board meeting, RateCity.com.au has analysed how much home rates have dropped since the last cut.

 The Reserve Bank last lowered the cash rate on March 19, down to 0.25 per cent and has left it on hold at the next six meetings.

In the last six-months, 90 lenders (69 per cent) have cut at least one variable rate, according to the RateCity.com.au database.

The lowest owner-occupier rate has dropped 0.50 per cent, down to 1.89 per cent.

Owner-occupier home loan rates changes in the last six months

These changes are from the April RBA meeting till 5th October 2020

7 April 2020NowDifference
RBA cash rate0.25%0.25%0%
Lowest variable rate2.39%1.89%-0.50%
Lowest 2-yr fixed rate2.09%1.99%-0.10%
Lenders with rates under 2%01212

Source: RateCity.com.au LVR and loan size restrictions may apply.

Rates from RateCity.com.au database are from RBA day Tuesday 7 April,2020 and 5 October, 2020.

The big four banks, which together hold approximately three quarters of Australia’s home loans, have also shaved their lowest variable rates by an average of 0.25 per cent in the last six months – but only for new customers.

Big four bank variable rate changes in the last six months

BankLowest variable rate: 7 AprilLowest variablerate nowDifference
CBA2.79%2.69%-0.10%
Westpac2.93%2.19% for 2 yrs, 2.69% thereafter-0.74% for first 2 yrs
NAB2.84%2.69%-0.15%
ANZ2.72%2.72%0.00%

Source: RateCity.com.au Rates from RBA day Tuesday 7 April,2020 and 5 October, 2020.
Westpac’s lowest variable rate is for a 70% loan-to-value ratio.

RateCity.com.au research director Sally Tindall said:

“A record number of people have refinanced in the last six months to take advantage of the low rates on offer, however, there are still hundreds of thousands of home-owners overpaying on their mortgage.

“The average existing owner-occupier is on a rate of 3.22 per cent, that’s 0.65 per cent higher than what the big four banks are on average offering new customers for a basic variable loan,” she said.

“There are 12 lenders now offering home loans below 2 per cent, and the list is growing by the week.

“With a possible rate cut waiting in the wings, we could even see a big four bank break the 2 per cent barrier over the next few months.

“The RBA has indicated it’s willing to cut the cash rate down to 0.10 per cent, and while this could come as early as tomorrow, the board is likely to hold off for at least another month.

“Holding fire on the next rate cut will give the RBA more time to properly assess the impact of the Federal Budget and the recent JobSeeker and JobKeeper changes.

“If the RBA cuts the cash rate by 0.15 per cent, there’ll be pressure on the banks to do right by their existing customers.

“At a time when every dollar counts, a rate cut of 0.15 per cent would save the average mortgage holder $33 a month,” .

Big Four Bank lowest rates

LenderAdvertised variableAdvertised2-yr fixedAdvertised3-yr fixed
CBA2.69%2.29%2.29%
Westpac2.19% for 2 years then 2.69%2.19%2.19%
NAB2.69%2.19%2.29%
ANZ2.72%2.29%2.29%

Source: RateCity.com.au.

Note: Rates are for owner occupiers paying principal and interest. Westpac’s rates are for customers with a loan-to-value ratio of less than 70 per cent.

This article is republished from propertyupdate.com.au under a Creative Commons license. Read the original article

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Finance

RBA Urges Banks to Keep Lending

RBA Urges Banks to Keep Lending-min

The Reserve Bank is urging major banks to use their buffers to keep lending to support business and developers following the largest economic contraction since World War II.

The Financial Stability Review showed banks’ share-to-price book ratios have recovered from March but they are still below pre-pandemic levels “reflecting a decline in the earnings outlook and a reduction in investors’ risk appetite”.

Although banks may want to maintain capital buffers, reducing credit would have a significant impact on the economy according to the RBA.

According to stress test simulations in the report showed banks have sensitivity to falls in GDP, property prices and unemployment.

Despite this uncertainty, housing finance grew 12.6 per cent in August off the back of government stimulus packages.

However, there were still risks associated with commercial real estate with conditions deteriorating in retail and the once tight office sector according to the RBA.

“The Australian banking system entered the pandemic with a much stronger capital position than in previous downturns,” the RBA review said.

“This balance sheet strength has enabled banks to absorb shocks, rather than amplify them as they did in the GFC.

“Banks have continued to lend, including enabling businesses to draw down lines of credit as a precaution early in the crisis.

“They do, however, face the prospect of sharp rises in borrower defaults.”

The review recognised some banks may be unwilling to eat into buffers due to facing automatic restrictions on earning distributions and acquiring lower capital ratios which could limit access or increase cost of funding.

Banks also want to avoiding regulatory repercussions as a way of reducing their own risks and protecting themselves.

“If banks were to cease lending in an attempt to conserve their capital buffers, the reduction in credit availability would have a significant contractionary impact on the economy,” the RBA said.

“By amplifying the downturn, this contraction in credit supply would ultimately be detrimental to the banking system.”

This article is republished from theurbandeveloper.com under a Creative Commons license. Read the original article.

________________________________________________________________________________

RENEE MCKEOWN

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Finance

Stimulus Pushes Lending to Record Highs

Stimulus Pushes Lending to Record Highs

Government stimulus has shown up in the latest lending figures as Australians take advantage of record low interest rates and government support to invest in new housing.

Housing finance grew 12.6 per cent in August, outstripping the previous 10.7 per cent gain in July, with first home buyers and owner-occupiers leading the charge.

First home buyers grew 18.3 per cent, while owner-occupiers clocked a 13.6 per cent increase—the largest month-on-month rise in the history of the series.

Housing finance figures are expected to increase again when the removal of responsible lending curbs take effect and place upward pressure on house prices despite stagnant net migration acting as a counter weight.

ABS’ August figures reflect customer demand in June and early July—prior to Victoria imposing its stage 3 and stage 4 restrictions.

Westpac economist Matthew Hassan said the impact on lending from Melbourne’s lockdown will be seen in next month’s figures.

“However, some other drivers of the strength in August will continue,” Hassan said.

“Reopening rebounds are likely to gather momentum in other states—‘catch-up’ activity augmented by low interest rates and ongoing fiscal supports.”

Meanwhile, the Reserve Bank said that rising levels of financial stress will increase the risk of home loan defaults.

In its bi-annual financial stability review, the bank said that if the unemployment rate hits 10 per cent it will double the rate of housing arrears.

“While credit is available at very low interest rates, reduced housing demand from very low immigration and the rise in unemployment contribute to the risk of further falls in housing prices,” the central bank said.

“This increases the potential for losses for lenders in the event of a rise in distressed sales.”

Mortgage arrears are expected to increase once the payment deferrals period ends.

Almost 900,000 mortgages, about one in 10, were deferred in March. By August, 9 per cent of loans worth $160 billion remained on deferral.

S&P analyst Erin Kitson said mortgage arrear rises are likely to be more pronounced in Victoria and areas where tourism is a major employer.

This article is republished from theurbandeveloper.com under a Creative Commons license. Read the original article.

________________________________________________________________________________

ANA NARVAEZ

________________________________________________________________________________

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Finance

Stimulus Pushes Lending to Record Highs

Stimulus Pushes Lending to Record Highs

Government stimulus has shown up in the latest lending figures as Australians take advantage of record low interest rates and government support to invest in new housing.

Housing finance grew 12.6 per cent in August, outstripping the previous 10.7 per cent gain in July, with first home buyers and owner-occupiers leading the charge.

First home buyers grew 18.3 per cent, while owner-occupiers clocked a 13.6 per cent increase—the largest month-on-month rise in the history of the series.

Housing finance figures are expected to increase again when the removal of responsible lending curbs take effect and place upward pressure on house prices despite stagnant net migration acting as a counter weight.

ABS’ August figures reflect customer demand in June and early July—prior to Victoria imposing its stage 3 and stage 4 restrictions.

Westpac economist Matthew Hassan said the impact on lending from Melbourne’s lockdown will be seen in next month’s figures.

“However, some other drivers of the strength in August will continue,” Hassan said.

“Reopening rebounds are likely to gather momentum in other states—‘catch-up’ activity augmented by low interest rates and ongoing fiscal supports.”

Meanwhile, the Reserve Bank said that rising levels of financial stress will increase the risk of home loan defaults.

In its bi-annual financial stability review, the bank said that if the unemployment rate hits 10 per cent it will double the rate of housing arrears.

“While credit is available at very low interest rates, reduced housing demand from very low immigration and the rise in unemployment contribute to the risk of further falls in housing prices,” the central bank said.

“This increases the potential for losses for lenders in the event of a rise in distressed sales.”

Mortgage arrears are expected to increase once the payment deferrals period ends.

Almost 900,000 mortgages, about one in 10, were deferred in March. By August, 9 per cent of loans worth $160 billion remained on deferral.

S&P analyst Erin Kitson said mortgage arrear rises are likely to be more pronounced in Victoria and areas where tourism is a major employer.

This article is republished from theurbandeveloper.com under a Creative Commons license. Read the original article.

________________________________________________________________________________

Ana Narvaez

________________________________________________________________________________

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