Another lender has taken the surprising step of slashing interest rates to ease some of the pain of rising costs, but it has a downside.
As of September 1, Virgin Money announced that it would reduce its variable interest rate by up to 0.2 percentage points, but only for new customers.
For new customers who applied for a loan on Thursday, variable owner-occupied home loans fell 0.2 percentage point, while variable investment home loans fell 0.1 percentage point.
The announcement follows similar decisions by Australia’s major lenders, including Commonwealth Bank of Australia, Westpac, NAB and ANZ.
Since the Reserve Bank of Australia began dramatically raising interest rates in May, data from RateCity shows that 23 lenders have now lowered their variable rates for new customers.
RateCity research director Sally Tindall said lenders are forced to cut rates to keep up with the competition.
“With refinancing at record highs and billions of dollars in fixed loans coming to an end, lenders are cutting variable rates to attract new borrowers,” he said.
However, the rate expert warned that existing customers were not benefiting from the same discounts or perks.
“Since the RBA started rising in May, existing variable customers have seen their rates rise by 1.75 percentage points, however the big four banks have been giving additional discounts to new customers,” said Ms Tindall. .
Borrowers who have been loyal to their bank for several years could be paying hundreds of dollars more each month on their mortgage than if they had shopped around.
The gap between existing variable rates for owner-occupants and rates for new customers has grown steadily since September across the mortgage industry.
RBA data revealed that the gap had widened to a staggering 0.47 percentage point in June. Ms Tindall said the gap was likely to widen as the cash rate continued to rise.
“If you think that, as a long-standing, loyal customer, your bank is doing well, check to see if that is indeed the case,” he said.
“The results might surprise you.”
RateCity suggests comparing the variable rate on your home loan to the rate offered to a new customer by the same lender.
“If this rate is lower than it is, then your bank is cheating you,” Ms Tindall said.
Interest rates have been the subject of much speculation, with the RBA deciding to raise rates a sensational four times in recent months.
Ongoing increases have caused the price of fixed rate home loans to rise rapidly and many Australians have instead turned to variable rate home loans which allow for more flexibility.
New figures from the Australian Bureau of Statistics show that the share of new home loans issued with fixed rates has fallen sharply from 46% in July 2021 to just 9%.
The cuts to variable interest rates come as the RBA prepares to meet next Tuesday.
Experts forecast that the authority will move to raise interest rates again, with some economists forecasting a 0.5 percent increase while others forecast a 0.25 percent rise.