A Queensland-based bank has released a new ‘rate tracker’ style home loan, believed to be the first of its kind in the nation’s market*.
Auswide Bank's RBA Rate Tracker Home Loan will track the movements of the Reserve Bank of Australia (RBA) cash rate. If the RBA shifts interest rates up or down, the interest rate attached to the home loan will move by the same percentage.
The RBA Rate Tracker Home Loan has been launched with a variable interest rate of 3.99 per cent per annum (Comparison Rate 4.01 per cent per annum) and provides both the customer and the bank with the certainty of a fixed margin over the RBA cash rate.
The mortgage has been launched to “provide further certainty to borrowers”, with the bank saying it will change the rate within two working days of an RBA cash rate change.
If the RBA cash rate falls to 0 per cent or below in the future, the bank has said that the customer will continue to pay the fixed margin.
The new loan is available on new owner-occupied home loans of $150,000 or more for purchase or refinance with an LVR of up to 80 per cent and includes the ability to make additional payments and redraw.
There is a low, upfront establishment fee of $300 and no ongoing monthly service fee; however a transaction account needs to be held by the customer with the bank.
Martin Barrett, Auswide Bank's managing director, commented: “The availability of tracker mortgages in Australia has been a topic at the current inquiry into the major banks having been highlighted by the parliamentary standing committee.
“As a small nimble bank focused on meeting a range of customer segment needs, we identified an opportunity to create this new product. It meets the needs of a group of borrowers who prefer a variable rate but value certainty and transparency about how much they will pay for their home loan and when interest rate changes will be passed on.”
“Like other lenders, Auswide Bank’s funding is not strictly tied to the RBA cash rate, yet we still have the flexibility to maintain a competitive overall operating margin and pay our depositors and investors competitive interest on their savings and term deposits. As a result we’ll continue to offer a variety of loan types and packages priced according to their features and benefits and customer preference.”
Mr Barrett said the Australian lending landscape is dominated by the ‘big four’ who are privileged in respect to their cost of funds and regulatory capital position.
“These are the areas that need attention if we are serious about improving competition in the Australian banking landscape. It was pleasing to see the chairman of ASIC call this out. Despite their privilege and the uneven playing field we face, Auswide Bank remains committed to increasing competition and providing Australians with a viable alternative delivering value the majors are unwilling to provide.”
The RBA Rate Tracker Home Loan will be available through Auswide Bank’s branches and Customer Contact Centre from Monday 17 October 2016, and will also be available via mortgage brokers accredited to Auswide Bank in the near future.
*according to the bank. However, Bankwest launched a rate tracker home loan in 2008 and 2009, both of which have since been pulled.
[Related: Banking review pushes for tracker mortgages]