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ISCOVER
Staff Reporter
The price war between Australia’s major banks has hit a new high, according to one brokerage.
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Loan Market Group’s eastside broker Michael Mobbs said Australia’s retail banks have altered the way they price home loan interest rates following the Global Financial Crisis and, as such, borrowers stand to profit.
“For many years leading up to the GFC, the retail banks moved in sync with the Reserve Bank of Australia, maintaining an average standard variable rate of around 1.80 per cent above the cash rate,” he said.
“Since January 2008, this gap has widened as the retail banks have been passing on the higher cost of funding loans, and today the average standard variable rate of the ‘big 4’ is 6.82 per cent, some 3.32 per cent above the RBA cash rate of 3.50 per cent.
“Additionally, post-GFC government legislation has put more responsibility on lenders so in turn they are looking to attract home loan borrowers with less risk.
“To this end, many lenders now offer higher interest rate discounts for customers with lower Loan-to-Value Ratios on their properties, ideally those with LVRs below 80 per cent.”
Mr Mobbs said competition between banks in the last 12 months had increased significantly, creating a price war as they try to win new business.
“Lenders offer interest rate discounts based on a loan tiering system, and prior to this price war most lenders had two or three tiers,” he said.
“Nowadays, some lenders have up to six tiers meaning an existing home loan may now fit within a new tier and qualify for a bigger interest rate discount.”
