It’s war! No, not anything in the Middle East or Eastern Europe. This battle is likely between the big banks as these loan-making titans compete in what has been called a refinancing war.
The first big bank to come out with guns blazing is Westpac, which has cut its variable home loan interest rates by 0.35%, which means new customers will get a mortgage deal of 5.84%.
However, it’s not a conditions-free offer because it’s for new customers, who’ll need to have at least a 30% deposit, and they’ll have to apply online for the loan.
News.com.au reports that Canstar’s Sally Tindall says a “refinance war” is starting. As you can see, however, Westpac is only looking for low-risk borrowers. Clearly, it will be those who own a property with good equity who’ll be able to pass the 30% deposit test.
Ms Tindall explained that ANZ has had the lowest rate on their home loans applied for online, so this move by Westpac indicates that this big four bank expects more rate cuts are coming from the Reserve Bank and it’s trying to get the jump on its rivals.
Moving out-of-step like this with the other banks has already given Westpac a first mover advantage, along with the free publicity a story like this brings. My story right here proves that point.
“Three of the big four banks are now in a digital arms race, jostling to steal customers from each other but only those customers willing to apply digitally,” Tindall said.
Let’s test out how good 5.84% is and I’ll check it out using canstar.com.au. I’ll look at the comparison rate of interest that gives you the real repayment cost of a loan, as this includes costs associated with the loan apart from the actual interest rate. This is what I found:
- IMB has a 5.79% loan, and the comparison rate is 5.82%.
- Loans.com.au has a 5.79% loan but the comparison rate is 5.83%.
- Unloan has a 5.74% loan where the comparison rate is lower at 5.65%!
News.com.au reports that Pacific Mortgage Group, People’s Choice, RACQ Bank, The Capricornian and Australian Mutual Bank currently tie for the lowest advertised price for refinances at 5.64% but, once again, I’d check out the comparison rate.
While refinancing war is coming, make sure you’re armed with the right information. Check out the comparison rate of any possible loan. If it’s over 5.84% and you want to reduce your monthly repayments, then avoid that loan.
One final word of warning: banks have many home loans so make sure you sign up for the one that suits you. If the actual rate is the most important issue, make sure you know the comparison rate for that loan.
Good hunting! Make sure you’re not a casualty in this refinancing war.
