Australia’s Westpac, the country’s second-largest bank, has stirred the mortgage market by reducing its variable home loan rates by up to 35 basis points. This new rate brings Westpac in line with ANZ for the lowest variable rate among the big four banks. The new rate of 5.84% is available to customers who meet certain conditions: they must apply online and have a 30% deposit.
Key Insights on the Refinancing War
The rate cut comes as part of a larger competitive trend where banks are engaging in what some experts are calling a “refinance war.” This term, coined by Sally Tindall, Canstar’s data insights director, highlights how banks are racing to offer the best possible deals to attract new customers.
“This is great news for people with a home loan,” Tindall said, emphasizing that homeowners could benefit significantly from the ongoing mortgage wars. However, the lowest rates are typically reserved for those meeting strict criteria, such as the large deposit requirement and an online application.
Digital-Only Loans and the Competition Among Banks
The pressure to stay competitive has pushed Westpac and ANZ into a fierce rivalry. Both banks now feature digital-only products, which require customers to apply online to access the lowest rates.
Tindall noted that this new digital arms race is reshaping the landscape, with some banks, like Commonwealth Bank (CBA) and NAB, falling behind.
“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 explained.
Refinancing Continues to Thrive Despite Steady Rates
According to the Australian Bureau of Statistics (ABS), over $206 billion in home loans were refinanced in 2024, despite the official cash rate remaining steady at 4.35%.
This high level of refinancing activity suggests that homeowners are actively searching for better deals, even when interest rates are not fluctuating significantly.
However, experts predict that the refinancing trend could intensify following the Reserve Bank of Australia’s (RBA) decision to lower the cash rate to 4.10% in February.
Beyond the Big Four: Exploring Alternative Lenders
While the big four banks dominate much of the mortgage market, the field of non-bank lenders is gaining traction. As per Canstar’s findings, over 35 lenders are offering competitive rates below 5.75%.
Notable among these are smaller institutions such as Pacific Mortgage Group, People’s Choice, and RACQ Bank, which offer rates as low as 5.64%. These lenders are proving that consumers can secure competitive rates even if they look beyond the traditional banking giants.
