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Westpac announced this week that they are preparing to introduce a new mortgage product that offers borrowers discounts for making sustainable upgrades to their homes.
The loans will be available to both owner-occupiers and investors who have an existing or approved eligible Westpac loan of at least $150,000. This product is designed for customers looking to enhance their property’s energy efficiency or climate resilience by adding new features or technology.
Potential upgrades could include solar batteries, hot water heat pumps, induction cooktops, EV chargers, bushfire-resilient fencing, storm and flood-resistant electrical systems, double-glazed windows, and energy-efficient air conditioning units.
It’s another example of lenders incentivising borrowers to think green.
In this week’s newsletter, we take a look at term deposit rates for the big banks, and the theoretical correlation between them and home loan interest rates.
Three of Australia’s four major banks have quietly reduced the interest rates on their term deposits. While they might claim to be anticipating moves by the Reserve Bank, the central bank isn’t expected to cut rates for at least another three to six months.
Some might describe this as an effort to bolster margins, while the banks prefer to frame it as a measure to protect their profitability. Either way, it benefits their bottom line.
However, this proactive approach by the banks doesn’t extend to lowering interest rates for borrowers. Mortgage rates are likely to remain unchanged until the Reserve Bank adjusts the cash rate—something that’s not expected until December, and more likely to occur next year. A few economists still predict a potential rate cut in November, but they’re in the minority.
Even when the Reserve Bank does decide to cut rates, it’s likely to be a modest reduction of just 25 basis points.
As for Westpac, the one major bank that hasn’t yet lowered its deposit rates, it’s probably only a matter of time. I’d wager that they’ll follow suit as early as this week.
The Commonwealth Bank, being the largest and most influential player in the market, led the way by cutting deposit rates by 50 basis points last week. This move gave National Australia Bank the opportunity to reduce its term deposit rates by the same amount on Monday, and ANZ followed by cutting 80 basis points.
While much attention is given to mortgage rates, the impact on savers—often older individuals who depend on interest income—receives less media focus.
After 18 months of intense competition among the big banks, with aggressive mortgage discounting and higher deposit rates to attract or retain customers, it seems a truce is emerging in the sector.
While consumers benefit from banks battling for market share, these competitive pressures also squeeze the banks’ margins and profitability.
Variable
The rates below are based on a $500,000 loan, with the borrower making principle and interest payments with a loan term of 30 years. The rates quoted may vary depending on the borrowers LVR.
1 Year Fixed
The rates below are based on a $500,000 loan, with the borrower making principle and interest payments with a loan term of 30 years. The rates quoted may vary depending on the borrowers LVR. At the end of the three year fixed period, the borrowers interest rate will revert to a standard variable rate for the life of the loan.
