Commonwealth Bank has cut owner occupier variable mortgage rates by up to 40 basis points and investor rates by up to 23 basis points, in a move that runs counter to APRA’s push to take the heat out of the housing market.
CBA’s lowest variable rate is now 2.29 per cent (down from 2.69 per cent), for owner occupier loans with loan-to-valuation ratios of up to 70 per cent.
Comparison site Canstar said the only one of the big four banks with a lower owner occupier variable mortgage rate is Westpac, which offers a two-year introductory rate of 1.99 per cent, which increases to 2.49 per cent after the intro period.
NAB’s best offer is 2.69 per cent on loans with LVRs up to 80 per cent. ANZ’s is 2.72 per cent on loans with LVRs up to 80 per cent.
CBA’s lowest investor rate is 2.89 per cent (previously 3.12 per cent) for loans with LVRs of up to 70 per cent.
ING also cut rates last week, reducing its owner occupier variable rate for principal and interest loans by 25 bps.
CBA cut its one-year fixed rate by 10 bps for owner occupiers and 20 bps for investment loans. It increased its two, three and four-year rates by 10 bps.
The rate cuts are a surprise, given that in previous periods when APRA has used macroprudential regulation to slow the mortgage market, lenders have responded by raising rates.
CBA is targeting borrowers with low LVR loans in its latest round of cuts, rather than the highly geared borrowers who are of concern to the regulator.
Even so, CBA’s move highlights the contradictory dynamics at play in the housing finance market. In a 2015 report, the Bank for International Settlements said macroprudential policies aimed at slowing the rate of credit growth are most effective when they are introduced during periods of interesting rate tightening.
When interest rate policy and macro policy are pulling in opposite directions, such as where monetary policy is kept loose but macro policies are invoked to deal with the financial stability implications of such loose policy, macro policies are "far less effective".
This is because "economic agents are being told simultaneously to borrow more and borrow less."