Which banks offer cheapest mortgages following recent rate cut?

Most lenders have announced cuts to interest rates on their variable-rate mortgages following the 0.25 percentage point reduction in the cash rate by the Reserve Bank of Australia (RBA) last Tuesday – the first change in the cash rate for almost three years.

Lenders take several factors into account when deciding how much of the cut to hand on to mortgage customers, including political and reputational contexts.

Financial institutions that had the toughest time at the recent Royal Commission into misconduct into financial services – CBA, NAB and AMP  — all passed on the cut in full to their variable-rate mortgage holders.

It just so happens that CBA, NAB and and AMP – the big financial institutions who got into most trouble during the royal commission into misconduct in financial services, passed on the cut to the cash rate their mortgage customers in full.

ANZ and Westpac, which did not get whacked quite as hard as the other three in the commission, elected to pass on only part of the cut.

ANZ cut its rates by 0.18 percentage points while Westpac is handing on 0.2 percentage points – though those with interest-only mortgages are receiving a cut of 0.35 percentage points.

ANZ pointed to the performance of its business, market conditions and the impact on its customers, including  depositors, as reasons for not passing on the cut in full.

The RBA governor, Philip Lowe, said in a speech following the rate cut that following a recent fall in banks' wholesale funding and deposit costs, there was no reason why they could pass on the cut in full.

Smaller lenders who have not handed on the full cut  include Virgin Money, Suncorp Bank, Heritage Bank, Bendigo Bank, Adelaide Bank and Westpac's subsidiaries – BankSA, Bank of Melbourne and St George Bank.

However, some of these already offered among the lowest mortgage rates in the market prior to the rate reduction.  Despite not passing on the full cut, they still are among the cheapest.

According to comparison site RateCity, those who will have particularly low rates on their variable-mortgages mortgages after the cuts include Reduce Homes Loans (3.19 per cent), Homestar Finance (3.24 per cent), Athena Home Loans and NAB-owned UBank (3.34 per cent), Bank Australia (3.44 per cent), and AMP Bank and Suncorp Bank (3.49 per cent).

People who previously considered themselves to be on a competitive mortgage interest rate may no longer have the best deal. Check you rate and, if not, shop around for an alternative.

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