Factors Behind Low Mortgage Rates: Australian Big 4 Banks

Team Veye | 08-May-2023 Australian Big Banks

The Big 4 Banks of Australia - considered the largest lenders (as they control about 80% of the country’s home loan and deposit market) have started pulling down their mortgage rates to resist losing their hold in the market. It’s an attempt to attract borrowers amid falling credit growth. The growth in Australian home loans fell to a four-year low of 5.6% in Jun’18.  

On the contrary, rising wholesale funding costs have forced smaller rivals to increase their rates. It has been the same story for the Big 4 banks as well as the pool of funds they are increasingly accessing to source home loans has become more expensive. Westpac's head of interest rate strategy David McColough stated that they haven't seen these levels of short-term interest rates, the cost of funds for the banks, outside of a financial crisis before.

However, the big banks are reluctant to pass this cost on to borrowers because not only would it make them loose their market share but it may also add to the growing social and political backlash stemming from the banking royal commission.

Last week, Australia and New Zealand Banking Group reduced the variable mortgage rate by 34 basis points to 3.65%, just days after, Commonwealth Bank of Australia had lowered some of its fixed mortgage rates by 10 basis points on competition grounds. ANZ’s discount will apply to new customers for loans financing less than 80% of a property

They have been constantly losing market share to smaller competitors who have been growing mortgage books at double-digit rates by offering cheaper rates in the past.  But over the past few months, majority of smaller banks have raised their home loan rates to protect profit margins against a sudden increase in wholesale funding costs. However, the big four banks are not jumping on the bandwagon. It will be interesting to see duration for which they can do so while trying to strike a balance between rising funding costs & decreasing market share.  


Veye Pty Ltd(ABN 58 623 120 865), holds (AFSL No. 523157 ). All information provided by Veye Pty Ltd through its website, reports, and newsletters is general financial product advice only and should not be considered a personal recommendation to buy or sell any asset or security. Before acting on the advice, you should consider whether it’s appropriate to you, in light of your objectives, financial situation, or needs. You should look at the Product Disclosure Statement or other offer document associated with the security or product before making a decision on acquiring the security or product. You can refer to our Terms & Conditions and Financial Services Guide for more information. Any recommendation contained herein may not be suitable for all investors as it does not take into account your personal financial needs or investment objectives. Although Veye takes the utmost care to ensure accuracy of the content and that the information is gathered and processed from reliable resources, we strongly recommend that you seek professional advice from your financial advisor or stockbroker before making any investment decision based on any of our recommendations. All the information we share represents our views on the date of publishing as stocks are subject to real time changes and therefore may change without notice. Please remember that investments can go up and down and past performance is not necessarily indicative of future returns. We request our readers not to interpret our reports as direct recommendations. To the extent permitted by law, Veye Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss, or data corruption) (as mentioned on the website www.veye.com.au), and confirms that the employees and/or associates of Veye Pty Ltd do not hold positions in any of the financial products covered on the website on the date of publishing this report. Veye Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services.

veye logo

Grab Your Free Report On 5 ASX Dividend Stocks To Buy In 2024