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One lender has highlighted the value of rate cuts over cashback offers after reducing its fixed rates by 40 basis points.
ME Bank has reduced its one-year standard home loan from 4.94 per cent to 4.89 per cent and cut its five-year standard home loan from 5.79 per cent to 5.39 per cent.
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Chief executive Jamie McPhee said the pressure of competition had prompted some lenders to use cash rebates to win over clients.
“Cashback sweeteners can be nice in the short term, but customers should understand they can save much more on their home loan in the long term by locking in a lower rate,” he said.
Mr McPhee said ME Bank’s rate cuts were made possible by a reduction in the cost of fixed-rate funding.
“Fixed-rate funding costs are falling as the market pushes out expectations for future RBA rate movements,” he said.
The market has also been affected by a tough federal Budget, below-average economic growth and a weak global economy, he added.
