Home loan pricing moved in two directions this week. Three lenders cut five variable rates by an average 0.15 percentage points. Two others lifted four rates by the same margin. Fixed rates stayed flat.
The average owner-occupier variable rate on principal and interest now sits at 6.64%. At the sharp end, one non-bank lender holds the lowest variable rate at 5.69%, though the number of sub-5.75% offers contracted from three to two over the past week.
One regional bank pushed its lowest rate under 6% for the first time, becoming the 50th lender to break that threshold since the rate-hiking cycle began in May 2022. That’s now over 60% of lenders tracked in available mortgage databases.
Why lenders are pricing in opposite directions
Funding costs remain the primary driver. Banks with stable deposit bases and access to cheaper wholesale funding can afford to compete more aggressively. Non-banks and smaller lenders often pay more for their funding, which limits how far they can cut without compressing margins.
Risk appetite plays a secondary role. Lenders lifting rates are either tightening serviceability standards or signaling they don’t need the volume right now. Those cutting are chasing market share, often targeting borrowers with strong equity positions and clean credit files.
Competitive positioning matters most at the margin. A lender cutting to 5.99% from 6.04% isn’t responding to a cost change, it’s buying attention. The psychological gap between a 5-handle and a 6-handle is real, even if the dollar difference on a $600,000 loan is $25 per month.
What the repayment data shows
The largest retail bank’s full-year results flagged early signs of stress among existing borrowers. The proportion of residential mortgage customers ahead on repayments fell from 87% in December to 85% by mid-year. Offset balances dropped from $97 billion to $94 billion over the same period.
Those numbers aren’t alarming yet, but they mark a reversal. Offset buffers built during the pandemic are now being drawn down to cover higher repayments. The shift is gradual, not sudden, which suggests borrowers are managing the transition so far.
New lending volumes at the major banks remain subdued. Applications are down, and settlement pipelines are thinner than a year ago. That explains why some lenders are cutting advertised rates to attract fresh business, while others are content to hold pricing and retain margins.
The refinancing calculus
If you’re on a rate above 6.3%, you’re leaving money on the table. The gap between the highest and lowest variable rates in the market is now over 1.5 percentage points. On a $500,000 loan, that’s roughly $650 per month.
Key numbers
- Average variable rate (owner-occupier P&I): 6.64%
- Lowest variable rate on offer: 5.69%
- Number of lenders below 6%: 50 (up from zero in early 2022)
- Major bank customers ahead on repayments: 85% (down from 87% six months prior)
- Drop in offset balances (six months): $3 billion
Refinancing costs have fallen as lenders waive application fees to win volume. Most borrowers with 20% equity and clean credit can secure a better rate within four weeks. The catch: some of the lowest advertised rates come with conditions, offset accounts may be excluded, or the rate may revert to a higher margin after twelve months.
Negotiating with your current lender is faster but less predictable. Some banks will match competitive offers to retain you. Others won’t move unless you threaten to leave. The outcome depends on your loan size, equity position, and how much your lender values your business.
What changes this picture
Two scenarios could shift pricing over the next quarter.
If funding costs rise, either through higher wholesale rates or deposit competition, lenders will pull back on cuts and widen margins. That would compress the gap between the best and worst rates, making refinancing less rewarding.
If new lending volumes stay weak, competitive pressure could intensify. More lenders may cut below 6% to chase market share, especially if credit quality remains strong and arrears stay low. That would widen the pricing spread and reward borrowers who shop around.
The RBA’s next move matters less than most people think. Even if the cash rate holds at 4.35% for another six months, individual lenders will keep adjusting their pricing based on funding costs and risk appetite. The days of synchronized rate moves across the market are over.
Your next step
If your rate starts with a 6 or higher, run the numbers on refinancing this month. Use a broker or contact three lenders directly. Ask for a written offer with the rate, fees, and revert margin spelled out. Compare the total cost over two years, not just the headline rate.
If your offset balance has dropped below $20,000, consider whether you’re still getting value from the account. Offset rates are typically 0.1 to 0.2 percentage points higher than standard variable rates. If you’re not using the offset, switch to a lower rate without one.
Subscribe to the newsletter for the weekly signal on rates, credit, and what’s moving next.
For more on how credit conditions are reshaping borrower options, see Private lending demand jumps 68% as bank credit tightens and Mortgage rates Australia: 5.69pc floor vanishes as lenders retreat.
General info, not financial advice.
