An online lender and a mutual bank have announced that they will be reducing interest rates on some of their home loan products.
Online lender Tic:Toc and Teachers Mutual Bank have both announced changes to some of their home loan offerings.
Tic:Toc has dropped its variable rate to 3.57 per cent (3.58 per cent comparison) for new customers (as of 28 September) and is offering its existing customers the same rate on a two-year fixed rate basis (down from 3.64 per cent previously).
Speaking of the change, Tic:Toc’s founder and CEO, Anthony Baum, commented that part of the decision to drop rates had been brought about by the findings of the financial services royal commission.
Mr Baum said: “It’s common practice among the major banks to lower interest rates for new customers while simultaneously hiking rates for existing customers. We were at risk of falling into the same trap, but to us, treating customers in that way isn’t right. We worked with our funder to overcome the usual practices by passing on even more of the cost savings from our digitised process. That means we can provide new customers a reduced variable rate, and our existing customers the same 3.57 per cent interest rate, but as a two-year fixed rate with no fees.
“We have quickly learnt you can’t change an industry overnight, but we are doing what we can, and it’s up to the customer to determine if they are willing to help us.”
“We have been 100 per cent open about the changes in our rates, because unlike the major banks, we don’t want to hide anything.”
Teachers Mutual Bank drops rates
Meanwhile, Teachers Mutual Bank has also announced that it is decreasing rates on some of its home loan products.
As of this week (2 October), the variable interest rate for new customers taking out the bank’s Flexi Choice Loan on a principal and interest basis will be 5.16 per cent (5.21 per cent comparison).
The same interest rate (which marks a 20 basis point drop on its current rates) will be made available to existing variable home loan customers with a Flexi Choice Loan from 1 November.
Out-of-cycle interest rate changes
Despite the official cash rate being held at its record low level of 1.5 per cent for more than two years now, a long line of non-major lenders have hiked rates in recent months — including Macquarie Bank, AMP, Bank of Queensland, Heritage Bank, Suncorp, Virgin Money and Auswide Bank — due to rising wholesale funding costs.
Three of the big four banks also hiked mortgage interest rates out of cycle this month despite the Reserve Bank holding the official cash rate.
NAB, on the other hand, decided to buck the trend last month and kept its rates on hold.
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