Trending Financial News 4 July

Westpac partly withholds rate cuts – again

Westpac has announced a rate cut of 0.20 percentage points on its range of owner occupier loans and investor (principal and interest) home loans. Westpac will cut 0.30 percentage points from its investor (interest only) loans.

These cuts apply across the Westpac Group, including to borrowers with St George Bank, BankSA and Bank of Melbourne, and follow the RBA’s 0.25 percentage point rate cut on Tuesday 2 July. This is the second month in a row that Westpac has retained some of the RBA’s rate cut.

Westpac executive David Lindberg said this rate cut meant that Westpac’s “Standard Variable Rate will be the lowest it has been in more than 45 years – for owner occupier home loan customers (who are paying principal and interest).”

The new rates come into effect on Tuesday 16 July 2019.

Suncorp cuts home loan rates by 0.19%

Suncorp Bank has announced a rate cut on variable rate owner occupier and investor home loans of 0.19 per cent pa. This follows the RBA cutting rates by 0.25 percentage points on Tuesday 2 July 2019.

“Our fixed and variable lending rates continue to be some of the most competitive in the market,” said Suncorp’s David Carter, “Many of our home loan customers are also receiving the cost benefits of a historical campaign price or package.” 

Suncorp’s new rates come into effect 19 July 2019. 

Attractive term deposit rates still available

Many term deposit rates are now hovering at or near the inflation rate of 1.30 per cent, meaning savers are not growing their money in real terms and are at risk of their money losing value.

“It’s very easy to let your savings get stuck in an account or term deposit that is paying less than 1.30 per cent now, which means your money is losing value,” said Vadim Taube, chief executive of InfoChoice

“While most banks and credit unions are trying their best to limit rate cuts to savers it is absolutely impossible to shield depositors completely from the pain of low savings rates.

“I expect term deposit rates will fall further from where they are now because the July rate cut has not yet been passed through,” said Mr Taube.

“Now is the time to lock in a good term deposit rate, like the Commonwealth Bank’s 2.20 per cent for 5 months, because rates are only heading down in 2019.”

Deeming rates set to be slashed

Pensioners who have been stung by high deeming rates since 2015 may get some relief as the government prepares to review the current rates.

Social Services minister Anne Rushton is believed to have asked for departmental advice on cutting the deeming rate to better reflect savings account and term deposit rates.

The current deeming rate for assets over $51,200 is 3.25 per cent. The top term deposit rates are now about 2.20 per cent.

National Seniors spokesperson Ian Henschke said the deeming rate needs to be cut by 1.25 per cent to reflect rate cuts over recent years.

“To leave the rates unchanged for more than four years while there has been five interest rate drops … shows the government is balancing the budget on the backs of pensioners,” Mr Henschke told The Australian.

Borrower’s expenses come under extra scrutiny

Borrowers are confused by changes to the way lenders assess their expenses and many applicants for home loans who previously could expect to be approved are now being rejected, according to mortgage industry expert John Kolenda from Finsure.

“The average consumer qualifies to borrow 20 per cent less now than 12 months ago and the criteria varies drastically across lenders.

“The latest housing finance figures from the Australian Bureau of Statistics showed the value of housing finance commitments was 19 per cent below what it was 12 months previously,” Mr Kolenda told The Adviser.

Mr Kolenda said the home loan market is now “highly restrictive, complicated and confusing” since the Royal Commission into the financial services industry. Banks are now, according to Mr Kolenda, making “forensic examinations of borrower expenses.”