Major bank announces huge home loan rate cut

The Commonwealth Bank of Australia (CBA) will reduce its fixed-rate home loans by up to 0.40 percentage points across all terms starting Friday, following a 0.25 percentage point cut to its variable rate in response to the Reserve Bank of Australia’s (RBA) recent cash rate reduction.

The new rates will see CBA’s lowest fixed offering set at 5.49% for a three-year term. Despite the move, experts say the cuts are unlikely to spark a surge in homeowners locking in their mortgages.

Sally Tindall, data insights director at Canstar.com.au, said the rate adjustments bring CBA closer to its major bank competitors but aren’t enough to significantly shift consumer behaviour.

“CBA’s fixed rate cuts aren’t groundbreaking, but rather a bid to inch closer to its key competitors,” Tindall said. “Fixed rates have been falling fairly consistently this year, and we expect this activity will continue as banks price in the increasing likelihood of further cash rate cuts.”

While CBA’s new rates mark progress, rivals remain more competitive. ANZ holds the lowest one- and two-year fixed rates among the big four banks, while National Australia Bank (NAB) continues to offer the most attractive three-, four-, and five-year fixed terms.

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Tindall also noted that with only a slim margin – just 0.10 percentage points – between current fixed and variable rates, many borrowers will likely hold off from locking in.

“With the possibility of further RBA cuts ramping up, it’s hard to see many people jumping at the chance to lock up their mortgage for the next three years,” she said. “The majors might have to offer a fixed rate in the ‘4’s’ if they’re serious about getting people to lock in.”

Canstar’s latest data shows a flurry of activity across the lending sector since the RBA’s decision. Twenty lenders have reduced at least one fixed rate this month, and five major lenders, excluding CBA, have already made cuts.

Among them, BOQ, Community First Bank, Police Bank and Queensland Country Bank now offer at least one fixed rate below 5%, setting the benchmark at 4.99%.

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Tindall urged borrowers to carefully consider their financial situation and risk appetite when deciding between fixed and variable rates. “If you’re deciding between a fixed or variable rate, understand what might suit your finances and, to some extent, your personality. When you make a decision, take the time to look for a competitive rate,” she said.

While the trend suggests fixed rates will continue to fall, CBA's latest move clearly shows the intense competition in the home loan market – one that still leaves many Australians hesitant to commit.

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