Westpac chases mortgage market

Westpac yielded to the pressure for more competitive pricing on its home loan products yesterday by dropping its standard variable mortgage rate by 28 basis points, to 5.98 per cent.

However, Westpac's alternative brands, under the St George umbrella, have cut their rates by only 25 bps.

At least seven other lenders, including Bank of Queensland, BankVic, Commonwealth Bank, Heritage Bank, ME Bank, National Australia Bank and Yellow Brick Road have said they will cut their variable rate home loans by 25 bps, in line with the same level of cut in the cash rate announced yesterday by the Reserve Bank of Australia.

CBA also cut its rates on residentially secured business loans by 25 bps.

Westpac has a lot of catching up to do to meet the market. In February 2012 it was the instigator of an out-of-cycle rate rise of 10 basis points.

The bank also took the pricing lead on home loans in late 2009 when it added 20 basis points to its home loan margin.

This helps explain why home loan rates are still more than 20 bps higher than their low point in April and May 2009, when the cash rate was 50 bps higher than now.