Westpac becomes first big bank with fixed rate under 5%

Westpac has lowered its fixed home loan rates, becoming the first of the big four banks to drop below the 5% mark in the current cycle, according to data from Canstar.com.au.

The bank’s new two-year rate for owner-occupiers paying principal and interest with a 30% deposit now sits at 4.89%, a cut of 0.70 percentage points. 

The reductions apply across the Westpac group, including St George, Bank of Melbourne and BankSA, with some terms falling by as much as 0.90 percentage points. Rates for other terms now range from 5.19% for one year to 5.59% for four- and five-year options.

The move places Westpac at the front of the pack among the major banks. Commonwealth Bank’s lowest two-year rate stands at 5.44%, while NAB and ANZ are both at 5.19%. For three-year loans, Westpac and NAB share the lowest rate at 5.29%.

More broadly, Canstar.com.au figures show that 30 lenders have trimmed at least one fixed rate over the past month. At the beginning of the year, no lenders offered a fixed rate under 5%, but 27 now do. 

Excluding eco loans, the lowest rate currently available on the market is 4.69% with Easy Street Financial Services for a two-year term, carrying a 5.29% comparison rate. Pacific Mortgage Group is offering 4.84% on one- and three-year loans, while lenders such as BOQ, Macquarie Bank, People’s Choice and Heritage Bank have five-year terms starting at 5.29%.

“Westpac has taken a chainsaw to its fixed rates today, cutting some by as much as 0.70 percentage points. It’s a decisive move from the big four bank. Today’s cuts mean Westpac now has the lowest fixed rate out of the majors,” said Sally Tindall (pictured), data insights director at Canstar.com.au.

“There’s also likely to be an element of competition driving Westpac’s decision today, despite the fact that fixing is not yet back in vogue with customers. This is also the first time in the current cutting cycle that a big bank has dropped a fixed rate below the 5% benchmark. That’s a considerable milestone and signals just how competitive the mortgage market is.”

Still, the choice between fixed and variable loans remains uncertain for Tindall, with little clarity on how many rate cuts the Reserve Bank will deliver and whether banks will pass them on in full.

According to her, most borrowers continue to prefer variable rates given the risks involved in getting the timing wrong on a fixed loan. However, she noted that those considering fixing should still compare deals across the market. 

“While Westpac is now chasing the market leader, there’s still 0.20 percentage points between the two,” Tindall said.