Bank perfect storm proving a boon for borrowers

ME Bank cuts its 3-year fixed rate to 4.69% p.a. (comparison rate 5.22% p.a.)

 

ME Bank today said a banking ‘perfect storm’ had created lending conditions rarely experienced by borrowers, as it cut its 3-year fixed rate to the lowest level currently offered by a bank in 23 years.

Jamie McPhee, ME Bank CEO, said “banks are currently weathering a rarely seen combination of a record low cash rate and record low credit growth, and have ample funds to lend.” 

“Banks are desperate to lend and are waiving fees, offering cash back, and are pricing fixed rates at record lows to win customers,” McPhee said.

In a sign of the competition between banks, ME Bank slashed its 3-year fixed Super Member Home Loan (SMHL) Standard Loan rate to 4.69% p.a. (comparison rate 5.22% p.a.), and not just on its Member Package but across loans outside the package including offset and investment loans.

McPhee said “credit growth has continued to sit below 5 per cent, and banks have ample funds to lend due in part to higher customer savings rates and higher loan repayments. Add in a record low cash rate and you’ve got a recipe for strong competition between banks.”

But McPhee also said there are traps for the unwary in a highly competitive environment, and warned borrowers to consider new home loan deals carefully before signing on.

“Increasing numbers of borrowers are being tempted by record low fixed rate offers, but with most splitting their loan across fixed and variable it’s the average across both that really matters. If the lender isn’t giving you a good deal across both fixed and variable then think again.”

“Always judge a home loan by the long term financial benefits. Don’t just hunt for cash-back and fee-waiver offers that only save you money in the short term. Use a home loan calculator to compare the savings on different deals.”

“Check the flexibility of the loan, particularly if it’s offering a special low variable rate. Some low rate loans come with restrictive features, charging you to do things you might think are free, like extra repayments, redraw, or a repayment holiday.”

McPhee said now is a perfect time to fix.

“The Reserve Bank is less certain about cutting rates in the near future and swap rates, which are an indicator of future variable rates, have jumped up 50-60 basis points in the last month, both of which suggest the current falling interest rate cycle is nearing its end.”

“Fixing isn’t just about locking in a low rate, it’s also about creating financial security and stabilising what for many households is one of their largest monthly costs.”

McPhee said ME Bank has secured a set portion of funding for the record low rate before swap rates increased several weeks ago.

“Like before, when we’re able to secure cheaper funding we pass it on to our customers. With swap rates now at higher levels this offer is limited so borrowers will need to get in quickly.

 

MATTHEW READ, MEDIA AND COMMUNICATION MANAGER

P 03 9708 3334 M 0432 130 338 Email

ME Bank is the only bank which is 100 per cent owned by Australia’s leading industry super funds. ME Bank provides industry super fund, union and employer association members with a genuinely fairer banking alternative.