Author: DavidBryde

Rate cut wash-up

With ANZ announcing its home loan rate cut last Friday, our Product Manager David Bryde takes a look at how much better off The Greater’s customers are than those who have a mortgage with the major banks.

After its monthly interest rate review, ANZ announced last Friday it will cut rates on its home loans by 20 basis points. This brings an end to the recent cuts made by the major financial institutions since the Reserve Bank of Australia reduced the cash rate by 25 basis points on 2 October 2012. 

Have a look at this handy chart (Table 1) I have prepared showing the home loan rates of The Greater and the major banks. The Greater’s Standard Variable Home Loan rate is 46 points (0.46%) lower than Westpac’s and 38 points (0.38%) lower than the average of the Big 4’s rates. The Greater also has the lower Basic Home Loan rate.


Table 1: Comparison of The Greater’s and the major banks’ standard and basic home loan rates. #  


The rate you should be paying attention to when comparing rates is the Comparison Rate, which is in brackets. This rate has to appear in advertisements by financial institutions but it is not always shown on some of the interest rate comparison websites. The comparison rate takes into account fees and charges you will pay on the loan. 

Notice how the much higher the Commonwealth Bank’s Basic Home Loan is than the others when you look at the comparison rate or true rate. The advertised rate is 6.09% but the true rate is 6.23%.

Table 2 shows why looking at comparison rates is important. It means money in your pocket. Greater customers with a Standard Variable Home Loan are paying $90 a month less than Westpac customers. Greater customers with a Basic Home Loan are paying $47 a month less than a Commonwealth Bank customer. That is a lot of dough each month to be throwing away or saving, depending upon with whom you bank. 

Table 2: Monthly repayments on $300,000 loan over 30 years



So now what? 

If you are a Greater customer then sit back and relax in the knowledge that you chose a better value home loan. (Or you can go out for coffee and cake or take in a movie with your savings.) If you are a bank customer, give us a call on 13 13 86 and we can show you how easy it is to switch to a better deal. 

# Rates are new rates as at 15 October, 2012. They may not yet have come into effect for existing customers. Our comparison excludes products offered by the banks that are for new borrowings only. The comparison rates provided  apply only to a $150,000 loan over 25 years. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

What would you do with an extra $90 per month? Tell us below.



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Hi again Brian We welcome your scrutiny and feedback. Some non banks have passed on more than we have in the past 12 months but some will still have rates higher than ours. Our profits are modest for our size and necessary if we are to remain financially secure. That allows us to continue serving our customers well and support the community initiatives we're involved in. We'll announce our profits at our AGM at the end of November and publish them online.



It's a shame the banks are mainly focused on when it comes to passing on the rate cuts. All institutions deserve scrutiny. There are plenty of "non-banks" who have passed on much more of the rate cut then the Greater - especially over the last year. It would be interesting to see how your profits line up with your argument....



Hi Brian Thanks for taking the time to comment on this blog. You raise some important issues. We’re passing on as much of the rate cuts to our customers as we can. The reasons we offer as to why we haven’t passed on more aren’t excuses, they are facts. The RBA’s September meeting media release did state "Australian banks have had no difficulty accessing funding, including on an unsecured basis" but it’s relevant to note that we aren’t a bank and don’t have access to all the funding sources that banks do. The Herald article you mentioned goes on to say... “Trouble is, lower [funding costs] they might be, but they're still higher than what the banks paid three or more years ago. As that old money is re-financed, the banks' average costs of funding must rise, even though at the margin rates are falling.” The most important point for our customers is that The Greater’s rates are still much lower than the major banks. Historically our borrowers have been better off in comparison to bank customers and we expect they will continue to be. (Thanks for noting that we’d left out the comparison rate disclaimer. We’ve since updated it)



Aren't you required to display a warning and comparison rate schedule ? Also here's another handy chart* showing that the Greater standard variable rate movement since October 2011 has been less then all the banks listed in your charts. Your failure to pass on the full amount of the reserve banks cash rate cut shows your are fast becoming just like a bank. Your even using the same excuses citing " intense competition and high loan funding cost" despite the reserve bank stating in their last minutes "Australian banks have had no difficulty accessing funding, including on an unsecured basis". *