Clawing Back Market Share: Big Four Fixed-Rate Mortgage ‘War’

Westpac Banking Corporation has made their next move as the interest war between the big four banks intensifies. The country’s second largest bank has offered discounts of up to 105 basis points for property investment loans in their second round of rate cuts made this month.

Westpac’s latest cuts target the first-home buyer market and “rentvestors,” a term to describe someone who owns a property, but turns it into an investment property opting to rent elsewhere.

Westpac has reduced fixed rates for first time buyers by 40 basis points for principal and interest repayments. Westpac is also introducing a five-year introductory variable rate for first-time buyers and eliminating establishment and monthly fees.

Related reading: Home Ownership Falling Among the Young and Poor

The market

Major lenders are reducing key fixed and investor interest-only rates despite the Reserve Bank and APRA’s 30 per cent cap on new lending. The big four are also snatching back market share lost to smaller lenders following the lending caps imposed on the bigger banks.

In recent weeks, NAB and ANZ adjusted their fixed rate loans, meaning all four banks have moved rates on both owner occupier and investment fixed loans, with Commonwealth Bank the first to make adjustments.

Analysis from RateCity shows lenders including CBA and Bank of Queensland offer limited time discounts for first home buyers, while Suncorp is waiving some fees.

ING, Macquarie Bank and Virgin Money have also reduced rates on their interest-only products.

Latest figures from the Australian Bureau of Statistics show the proportion of new lending going to first home buyers at 17.9 per cent, just below November’s 18 per cent level, a five-year high.

Shots fired

RateCity.com.au’s money editor Sally Tindall says the changes reflect the banks’ long-term outlook on the cash rate.

“The fixed-rate war shows our big banks are not pricing in a rate hike anytime soon,” she said.

“The series of cuts show competition has returned to the investor interest-only space. After reaching their caps imposed by APRA, the big banks are opening up their books again.

“This is good news for people in the market who are looking for the financial security fixed rates can bring.

“Five years without having to worry about a rate hike is the kind of peace of mind a lot of home hunters are looking for,” Tindall said.

Mortgages represent about 55 per cent of the nation’s bank loans, according to analysis by Morgan Stanley. They make up about 25 per cent of group revenues but contribute 30 per cent of cash earnings, according to its analysis.