Advertisement

Three Aussie Banks Have Slashed Their Interest Rates

More Australian banks have said they are jumping on the interest-rate-cut bandwagon.

Bankwest, ME Bank and UBank are all set to cut their rates, remaining competitive with the big four banks, who have also made reductions in recent weeks.

ME Bank announced cuts to its variable and fixed interest rates by up to 0.26 percent on Wednesday. Competitor UBank also announced fixed rates cuts up to 0.30 percent which will come into effect on Friday.

ME Bank rate changes. Photo: RateCity.com.au

Both ME Bank and UBank have cut their owner-occupier and investor home loans, a move which brings them into line with Australia's major banks.

READ MORE: Why Cutting Interest Rates Won't Juice The Economy

Ubank rate changes. Photos: Ratecity.com.au

Bankwest also announced rate cuts, effective this Friday. The most significant change from Bankwest involved a 0.50 percent cut its three-year owner-occupier fixed home loan.

Bankwest rate changes. Photo: RateCity.com.au

The Commonwealth Bank, NAB and Westpac all made rate cuts in April by 0.20 percentage points. Last Friday Macquarie Bank also made the move, offering owner occupiers paying principal and interest cuts between 10 and 15 basis points.

READ MORE: Westpac Rate Rise Could Lower House Prices

RateCity -- a loan comparison website --research director Sally Tindall said it’s good to see competition in the home loan market heating up.

“The big four banks have all cut their fixed rates in recent weeks forcing smaller lenders like ME and UBank to follow suit to stay in the game,” she said.

“We’re likely to see more lenders drop their fixed rates in coming weeks, particularly as speculation of an RBA rate cut mounts.”

Reserve Bank of Australia
The RBA kept rates steady in May. Photo: Getty Images.

The Reserve Bank of Australia (RBA) put rates on hold at 1.5 percent for at least another month on May 7. The bank's move saw the continuation of a period of policy stability that's been in place since August 2016.

Despite this, the RBA indicated it could cut rates soon,  should labour market conditions continue not to improve.

"...the board will be paying close attention to developments in the labour market at its upcoming meetings," RBA governor Philip Lowe said in May.

Lowe also said lower unemployment was part of the RBA's decision not to cut rates In May.

What Does This All Actually Mean?

Essentially, the RBA will make an interest rate cut to stimulate economic growth. A lower interest rate will reduce the cost of borrowing money for people to have a home loan.

Interest rate cuts affect how much people need to repay in a loan. Photo: Getty Images.

If customers have a lower interest rate, they can borrow more money (because they can afford more as they are paying less back). This encourages spending and stimulates the economy.

While it can be hard to link decisions from the RBA and big banks directly to the lives of everyday Australians, rate cuts can affect mortgages, credit card repayments, investments and even personal savings.

Contact Siobhan at skenna@networkten.com.au