What's a competitive rate right now? 49 lenders now offer variable rates under 6%

The Reserve Bank held the cash rate at 4.35% in August, but lenders kept cutting anyway, and 49 of them now offer variable rates under 6%. The right rate is different for every borrower, but the market is clearly moving. If yours hasn't moved in years, it's worth checking where you sit.

Why are lenders cutting when the RBA isn't?

The Reserve Bank left the cash rate at 4.35% on 11 August.

Lenders cut anyway. Since the start of June, 31 of them have dropped variable rates for new customers, and 49 now offer at least one rate under 6%, up from 38, according to Canstar.

The lowest advertised rate on 10 August was 5.69%.

With the cash rate flat, the cuts are lenders competing for new borrowers.

So what counts as a competitive rate?

It helps to know how your rate shapes up against the broader market.

The average advertised variable rate for owner-occupiers was 6.64% on 10 August, on Canstar's database.

But the advertised rate isn't what people actually pay. The Reserve Bank's lending data shows new owner-occupier variable loans settled in June at an average of 6.25%.

Part of that difference is discounting lenders give to borrowers who ask but never publish.

Treat 6.25% as a guide, not a target. It's an average across every new variable loan written in June, and what any one borrower pays depends on their equity, their loan and their lender.

What the guide does show is roughly where the market sits. If you haven't renegotiated since August 2021, Canstar puts you at around 6.97%. In a June comparison, Canstar put a borrower on 6.98% against an advertised 5.99% rate and found the gap costs about $62 a month for every $100,000 owing. The two rates won't necessarily carry the same fees, features or eligibility criteria.

What's the catch with the under-6% rates?

The lowest rates come with conditions. Canstar notes LVR and other requirements apply to its under-6% list, so how much equity you hold shapes which of them you can actually get.

In many cases they're also for new customers only. A lender can advertise a lower rate to win new borrowers while leaving its existing customers exactly where they are.

And the unpublished discounts aren't automatic. In its 2020 home loan price inquiry, the ACCC found the size of a borrower's discount depends partly on "how hard the borrower pushes for a discount".

Most borrowers never make that push. A Canstar survey of 2,891 people found 52% have never changed lender and only 6% switched in the past year.

Can you get a lower rate without switching?

Sometimes, yes. It's called repricing: your lender cuts your existing rate to keep you, with no new loan application and typically no switching costs.

Even if your own lender hasn't cut, other lenders' rates give you something to negotiate with.

We can make that case for you. We contact your lender on your behalf, put the rates you could get elsewhere in front of them and ask them to do better.

Whether they move depends on your circumstances and how your current rate compares. But lenders will sometimes cut your rate rather than lose your loan: the same ACCC inquiry found the big four banks had cut the price on more than 600,000 home loans in a single year.

One check we run before you accept anything: a retention offer, the cut your lender makes to keep you, doesn't always match what switching would get you. So we compare it against the market first.

Is the cheapest rate always the right loan?

No. A rate is one part of a loan.

Depending on your circumstances, not every loan product is available to you, and not every one that's available is a fit. Your loan-to-value ratio, which is your loan as a share of your property's value, shapes which products and rates you can get.

The right loan also depends on the features you'll actually use, like an offset account or redraw, the loan type and whether the lender suits your situation.

That's part of the work when we compare loans for you.

Why act now?

The Reserve Bank hasn't ruled out raising the cash rate again. If the cash rate rises, variable rates rise with it, from wherever your loan is sitting that day.

And switching costs can come back quickly. ASIC's Moneysmart worked example recovered the costs of refinancing within five months.

Find out where you stand

Send us your current rate and how long is left on your loan.

We'll tell you how you compare with the market, and whether it's worth asking your lender to reprice or refinancing to a lender with a lower rate.

Disclaimer: This is general information only and not financial advice. Everyone's situation is different, so before making any decisions about your mortgage or finances, talk to a qualified professional who can look at your specific circumstances. Rates referenced are advertised market rates sourced from Canstar, the RBA, Cotality and SQM Research as at the dates shown, are not an offer of credit and are subject to change. Fees and charges are payable. All applications are subject to eligibility criteria and credit approval.