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Aussies hunting for cheap fixed or variable rates face a grim reality check, after lenders quietly ditched the ultra-competitive lowest mortgage floor overnight following fresh RBA warnings.
The window for rates below 5.69 per cent is effectively being slammed shut – just weeks after a tiny handful of mutual banks and non-bank lenders kept hope alive that borrowers might see greater relief to come.
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RBA governor Michele Bullock has been clear that there is the possibility of rates hiking again. Picture: Nikki Short
Canstar.com.au database tracking shows lenders have begun pulling back their lowest variable tiers towards 5.79 per cent and higher – leaving thousands of households facing the prospect of sub-5.70 per cent deals dying fast.
“There’s been some movement at the top end of the list with LCU dropping back – from a variable rate from 5.69 per cent to now offer a rate from 5.79 per cent,” Canstar told The Courier-Mail.
But Canstar data insights director Sally Tindall added that over 60 per cent of lenders on the database now had at least one variable rate starting with a 5 – though just one of them, Westpac, was a Big Four bank.
“While Australia’s three biggest banks have seen a retreat in new mortgage applications, CBA’s full year results presented the slightest of cracks in its existing customers in the face of higher rates.”
“A total of 85 per cent of the bank’s residential mortgage customers are ahead on their repayments. Sounds like a great buffer for the bank but that’s down from 87 per cent in December of last year, while offset balances took a small step back to $94 billion, down from $97 billion at the end of 2025.”
She said it was a sign that some borrowers were increasingly feeling the strain against the tide of higher costs.
How cash rates are faring around the world. Source: Canstar
“Refinancing or haggling remains the key at this stage, with some banks openly willing to negotiate with advertised rate cuts for new customers, while others would prefer to keep such negotiations behind closed doors for now.”
Adding fuel to panic, official central bank insights reveal interest rate relief is nowhere in sight for borrowers – and costs are still at risk of moving higher despite RBA sitting on its hands last week at the August monetary policy meeting.
Assistant governor (financial markets) Christopher Kent came to the defence of RBA governor Michelle Bullock’s hawkish tone after the event.
“(Governor Bullock) was being as transparent as she could to note that the tone of the conversation in the board meeting was very much concerned about those upside risks,” Dr Kent revealed. “And that concern suggests that there is that possibility of rates going up further…”
Dr Kent warned ongoing global uncertainties – including conflict disruptions in the Strait of Hormuz and sluggish domestic productivity growth – were key threats that could force the RBA to hike again.
He flagged that scheduled mortgage payments were now near peak levels relative to household income, with falling home values expected to eventually flow through to spending.
“Housing prices have declined, but they had also come off very high levels,” Dr Kent said.
“Declines in housing prices… have some effect on people’s willingness to spend. So maybe that’s to come.”
Big four lowest variable owner-occupier rates. Source: Canstar
Despite the absolute interest rate market floor rising, the overall pool of lenders competing under the 6 per cent mark has actually expanded this week – even if the entry price is steeper.
Canstar said “the list of lenders offering at least one variable rate under 6 per cent has now reached 51” on its database.
“Homestar Finance has cut some new customer variable rates and is now offering a rate from 5.93 per cent. This is for online refinancing.”
“BankVic has introduced a new variable rate from 5.93 per cent for police officers new to the bank or from 5.99 per cent for anyone else new to the bank.”
The lowest rate on the market of 5.69 per cent is now being offered by just one lender Pacific Mortgage Group followed by 5.74 per cent from Horizon Bank and then 5.79 per cent by LCU and The Mutual Bank.
Westpac remains the only member of the big four advertising a sub-6 per cent variable rate for new owner-occupier customers.
LENDERS IN THE SUB-6% VARIABLE RATE CLUB:
Rate from | Lender
5.69% Pacific Mortgage Group
5.74% Horizon Bank
5.79% LCU, The Mutual Bank
5.80% Unity Bank
5.84% Border Bank, Greater Bank, Police Bank, Virgin Money
5.89% BCU Bank, Bendigo Bank, Freedom Lend, Gateway Bank, Mortgage House, Police Credit Union, RACQ Bank, Transport Mutual Credit Union, Unloan
5.93% Bank of China, BankVic, Homestar Finance, P & N Bank, Southern Cross Credit Union
5.94% loans.com.au, Northern Inland Credit Union, NRMA Home Loans, Woolworths Team Bank
5.95% Bank Australia, Community First Bank, Tiimely Home, Up
5.99% AMP, Australian Mutual Bank, Bank First, Easy Street Financial Services, Firefighters Mutual Bank, Health Professionals Bank, Hume Bank, IMB Bank, ING, MoveBank, Newcastle Permanent, People First Bank, Queensland Country Bank, Reduce Home Loans, Regional Australia Bank, Summerland Bank, Teachers Mutual Bank, The Capricornian, UniBank, Westpac
(Source: Canstar.com.au. Rates based on owner occupier loans. LVR and other requirements apply. Excludes green loans)