Westpac takes first shot in refinancing war: Slashing variable rates

That discounted rate is offered to those who refinance online to the bank's Flexi First Option home loan and marks a 35 basis point cut on the product's previously advertised rate. 

However, not all borrowers will be eligible for – or willing to take up – the mortgage product.

Borrowers must have a loan-to-value ratio (LVR) of 70% or less to take up the deal.

Those with smaller deposits or less equity will face a less competitive interest rate of 5.94% p.a. (comparison rate* 5.95% p.a.).

Additionally, the online-only offer isn't available to those refinancing through a broker or branch.

"We expect our refreshed offer, coupled with the convenience of refinancing online, will appeal to both owner occupiers and investors looking for a fast and simple way to achieve greater savings on their existing home loan," Westpac managing director of mortgages James Hutton said.

The big bank has realised a 45% increase in mortgage borrowers refinancing to its books in the most recent quarter.

"With cost of living remaining top of mind for many Australians, savvy refinancers are making the most of the competitive mortgage market and shopping around for a better deal," Mr Hutton said.

Rates offered to those refinancing to Westpac online include:

	LVR	Rate	Comp rate*
Owner-occupier	≥80%	6.59%	6.59%
	70-80%	5.94%	5.95%
	≤70%	5.84%	5.85%
Investor	≥80%	6.89%	6.89%
	70-80%	6.19%	6.20%
	≤70%	6.09%	6.10%

The discounted products won't be for everyone, though.

“While our Online Home Loan offer is available direct to refinancers online, many customers will still choose to go to a lender or broker for their expertise and face-to-face support,” Mr Hutton said.

How does Westpac's new variable home loan rate stack up?

It's the latest move in a game of direct-to-customer home loan offers put forward by big banks in recent years.

The ANZ Plus Home Loan has advertised rates matching those now offered by Westpac since the bank implemented the Reserve Bank rate cut in February.

That rate, from ANZ's app-based mortgage product, is applicable to refinancers with LVRs as high as 80%.

Additionally, the bank offers a $2,000 cashback deal to new-to-bank borrowers refinancing loans of $250,000 or more before 31 March.

CommBank unveiled its Digi Home Loan, which currently offers a rate of 5.90% p.a. (comparison rate* 6.03% p.a.) to direct-to-bank refinancing customers, in the middle of last year.

Contrastingly, NAB doesn't currently offer an online-only refinancing product.

Its lowest variable home loan rate is 6.19% p.a. (comparison rate* 6.23% p.a.) - head and shoulders above those promised by its peers.

Looking past the big four, many mutual banks currently advertise home loan rates as low as 5.64% p.a.

These include Horizon Bank, Australian Mutual Bank, and Summerland Bank.

Investors on the hunt for competitive refinancing deals

While owner-occupiers typically face the lowest advertised home loan rates, investors appear to be making the most of the RBA rate cut.

Think Mortgage director Kapil Virmani reports seeing "significant movement" among investors hunting the most competitive rates.

"Of course, everyone wants a lower rate, but this is particularly the case with investors, who regard their property as a financial asset and are very numbers-driven," Mr Virmani said.

"Owner-occupiers are more likely to set and forget their home loan."

Mortgage complacency could be a major financial mistake.

A mortgage holder with a $600,000 home loan realising an interest rate of 6.00% p.a. could save more than $950 a year by refinancing to a mortgage rate of 5.75% p.a.

Looking longer term, that same borrower could save nearly $29,000 over the life of a 30-year mortgage.

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_{Image by Sam Wilson via Wikimedia Commons}