Westpac slashes fixed home loan rates to as low as 5.89% p.a.

Australia's second most prolific home loan lender has followed in the footsteps of big four peer NAB, slashing its fixed home loan interest rates on Wednesday.

Westpac now boasts the lowest advertised rate of any big four bank - 5.89% p.a.

That rate is now between 60 and 80 basis points lower than it was yesterday and is available to borrowers with loan-to-value ratios (LVRs) of 70% or less who are fixing their rate for two to five years.

According to Your Mortgage's database, the lowest fixed interest rates on the market are currently advertised by Community First Bank and RACQ Bank.

The former promises a 5.59% p.a. three-year fixed rate to first home buyers with a 20% deposit (6.29% p.a. comparison rate*) while the latter advertises a 5.59% p.a. five-year fixed rate to Queensland owner-occupiers with LVRs of 60% or less (6.16% p.a. comparison rate*).

Though, despite the low rates on offer with some lenders, borrowers have been turning up their noses at fixed rate home loans in recent times.

Approximately $1.4 billion worth of home loans funded in June boasted a fixed rate, representing less than 3% of all mortgages entered into that month, according to ABS figures.

That suggests borrowers are holding out for a raft of rate cuts that could come if the Reserve Bank of Australia (RBA) board were to drop the cash rate in the near future.

See how today's rate cuts could impact your repayments: Home loan repayment calculator

Westpac home loan changes for fixed rate owner-occupiers

The following changes have been made to Westpac's fixed rate home loans for borrowers who also sign onto its Premier Advantage package.

The package offers a 20 basis point discount on the bank's standard fixed rates, and an additional 10 basis point discount is on the table for new borrowers with LVRs of 70% or less:

Fixed rate period	LVR	Change	New rate (p.a.)	Comparison rate* (p.a.)
One year	≤70%	-50bp	6.09%	7.62%
	≤80%	-50bp	6.19%	7.72%
	>80%	-50bp	6.49%	8.01%
Two years	≤70%	-60bp	5.89%	7.45%
	≤80%	-60bp	5.99%	7.55%
	>80%	-60bp	6.29%	7.84%
Three years	≤70%	-70bp	5.89%	7.32%
	≤80%	-70bp	5.99%	7.41%
	>80%	-70bp	6.29%	7.70%
Four years	≤70%	-70bp	5.89%	7.19%
	≤80%	-70bp	5.99%	7.29%
	>80%	-70bp	6.29%	7.58%
Five years	≤70%	-80bp	5.89%	7.08%
	≤80%	-80bp	5.99%	7.18%
	>80%	-80bp	6.29%	7.47%

These rates may be available to borrowers taking out a new home loan of $150,000 or more and making principal and interest repayments.

It's worth noting that comparison rates on Westpac's Premier Advantage fixed rates are bumped higher by a $395 annual package fee charged to borrowers.

Those considering the product would be wise to calculate whether the 20 basis point discounted interest rate and other savings on offer are worth paying the additional fee.

New fixed rates for property investors borrowing with Westpac

Westpac also slashed rates for those looking to buy or refinance a home loan on an investment property and making principal and interest repayments.

New rates for fixed rate investment mortgages with the bank's Premier Advantage package and principal and interest repayments include:

Fixed rate period	LVR	Change	New rate (p.a.)	Comparison rate* (p.a.)
One year	≤70%	-45bp	6.24%	8.12%
	≤80%	-45bp	6.34%	8.22%
	>80%	-45bp	6.64%	8.51%
Two years	≤70%	-40bp	6.09%	7.91%
	≤80%	-40bp	6.19%	8.01%
	>80%	-40bp	6.49%	8.30%
Three years	≤70%	-60bp	6.09%	7.75%
	≤80%	-60bp	6.19%	7.84%
	>80%	-60bp	6.49%	8.13%
Four years	≤70%	-60bp	6.09%	7.59%
	≤80%	-60bp	6.19%	7.69%
	>80%	-60bp	6.49%	7.98%
Five years	≤70%	-70bp	6.09%	7.46%
	≤80%	-70bp	6.19%	7.55%
	>80%	-70bp	6.49%	7.84%

Fixed rates for investors looking to make interest only repayments are higher than those listed above.

Westpac latest lender to cut rates amid RBA speculation

The big four bank isn't alone in slashing its fixed rate offerings in recent weeks amid further divisions in opinion on whether the Reserve Bank of Australia will cut the cash rate this year.

Macquarie Bank cut rates on some of its fixed rate line up by up to 76 basis points last week, and NAB dropped many of its fixed rate offerings in late July.

The moves came around the time of the latest RBA meeting and amid comments from RBA governor Michele Bullock.

Banks and lenders typically adjust advertised fixed interest rates when they expect the interest rate environment to change in the coming months and years.

After all, they could be stuck honouring home loan rates they advertise today years down the track.

The biggest influence on the interest rate environment is the cash rate.

With the RBA having hiked the cash rate 13 times since mid-2022, most market participants and experts are now expecting its next move to be a cut.

However, Ms Bullock has recently been adamant that the RBA board is not interested in cutting the cash rate until 2025.

Despite her resolve, economists at CommBank are still backing a November rate cut.

The biggest of the big four banks believes the coming months will bring a downside inflationary surprise, which could force the RBA to cut, perhaps to avoid a recession.

"Overall we believe that if the economic data over the near term evolves in line with the RBA's latest forecasts the cash rate will be left on hold until [the first quarter of] 2025," CommBank head of Australian economics Gareth Aird said on Tuesday.

"But we continue to side with market pricing and think it more likely than not we will see an interest rate cut by the end of the year.

"That might look odd given the governor's recent comments."

Westpac pushed back its forecast for a rate cut earlier this month and now predicts the RBA board's first downwards move will come in February, as does ANZ.

NAB is more sceptical, having delayed its forecast for the first cut to May 2025.

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