‘Reduce’ set new mortgage benchmark, 1.77%

John Kavanagh

Several small lenders responded immediately to yesterday’s Reserve Bank monetary policy decision with changes to mortgages rates, including three lenders that cut their rates by more than 15 basis points.

Reduce Home Loans cut rates by between 10 and 20 bps. It set a new benchmark in the mortgage market, offering a variable rate of 1.77 per cent to borrowers with loan-to-valuation ratios of less than 60 per cent.

On loans with LVRs under 80 per cent, Reduce is offering a rate of 1.99 per cent.

Pacific Mortgage Group cut rates by between 10 and 16 bps, offering an owner occupier variable rate of 1.89 per cent to borrowers with loan-to-valuation ratios of less than 60 per cent.

Freedom Lend cut its variable rate by 20 bps to 2.19 per cent.

Comparison sites reported that Athena, homeloans.com.au and Homestar Finance all owner occupier rates by 15 basis points.

The Reserve Bank cut the cash rate target from 25 bps to 10 bps, the three-year government bond yield target from 25 bps to 10 bps, the term funding facility rates from 25 bps to 10 bps and the interest rate on exchange settlement balances from 10 bps to zero.

Canstar said a 15 bps reduction in the average variable rate on a $500,000 loan – from 3.35 per cent to 3.2 per cent – would reduce annual interest payments by $495.