The median house price in Sydney is approximately $885,000. Thirty percent of that median price equates to $265,500 dollars. In March this year, the median house price was still over $1 million (approximately $300,000 at a 30 per cent deposit). That's the amount Westpac is asking customers to fork out if they take up its discounted Flexi First Option Principle and Interest rate.
Westpac has dropped its Flexi First Option Principle and Interest rate from 2.93 per cent to 2.69 per cent (comparison rate 2.70 per cent). in a bid to attract low risk borrowers - those who can afford a loan to value ratio (LVR) of 70 per cent - and increase its home loan book, which has decreased since the COVID-19 pandemic took hold.
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This is now the lowest variable interest rate offered by one of the big four banks.
Westpac Group, which is the umbrella company for St George, Bank of Melbourne and BankSA, has also seen its subsidiaries cut several new customer rates.
St George and Bank of Melbourne now offer variable rates from 2.59% (comparison rate 2.61 per cent) for new customers with a 60% LVR (0.10% cut), while BankSA is offering variable rates from 2.64% (comparison rate 2.66 per cent) for new customers (0.10% cut).
Are these rate cuts affordable?
It's a great rate, but not many people can afford a $200,000 to $300,000 deposit.
Of course, those who can't, aren't the bank's target market in this case.
Looking at median house prices across the nation, Australians would be paying an average $200,000 to even be considered by Westpac for this rate cut.
Even in regional Australia, you would be forking out close to $120,000.
There is a good reason Westpac has taken this path, especially as the country comes out of the pandemic. With unemployment expected to soar and the banks bracing for loan defaults, Westpac, in this case, is attempting to safeguard its loans.
That's understandable, but it does leave many borrowers out in the cold.
There are alternatives
Westpac could be seen as taking a risk here.
With interest rates at historic lows, those who can't afford to lay out a 30 per cent deposit will happily seek out an alternative lender; a lender that has no issue rolling out a low interest rate available to everyone.
In InfoChoice's comparison database, Homestar (comparison rate 2.40 per cent), Reduce Home Loans (comparison rate 2.39 per cent) and Tic:Toc (comparison rate 2.40 per cent) are all offering a variable rate of 2.39% for owner occupiers.
There are lower rates still, with Reduce Home Loans offering 2.29 per cent for its Low Rider Variable home loan (comparison rate 2.32 per cent) and Freedom Lend offering the same for its Owner Occupied Special Variable P&I 60% (comparison rate 2.36 per cent).
Of the big four, the ANZ Simplicity PLUS P&I Special Offer (LVR not >80%) has an interest rate of 2.72 per cent (comparison rate 2.76 per cent).
The NAB Base Variable Rate Home Loan - Principal and Interest Special Offer LVR 80% has an interest rate of 2.84 per cent (comparison rate 2.76 per cent).
Commonwealth Bank's Extra Home Loan LVR <=70% (P&I) has a variable rate of 2.79 per cent (comparison rate 2.80 per cent).
While Westpac's new loan rate is low, there are better deals available for those who can't afford to shell out a 30 per cent deposit. It's worth comparing variable home loans through InfoChoice, to see what best suits your affordability needs.
And to know what you can afford, how your home loan payments will fit into your budget and what the monthly, fortnightly and weekly repayments will be for any loan. you can find out just how much you can borrow by using the InfoChoice Home Loan Calculator.
Compare home loans options here to see how much you could save.
This update is not financial advice. This article is general news and information.
Home Loans: The comparison rates are based on a secured loan amount of $150,000 and a term of 25 years.
Personal Loans: The comparison rates in this table are based on a loan of $30,000 and a term of 5 years unless otherwise indicated in the product name with^, in which case, the comparison rate is based on a loan of $10,000 and a term of 3 years. The comparison rates are for unsecured personal loans only for the relevant amounts and terms. The comparison rates for car loans and secured personal loans are for secured loans unless indicated otherwise.
WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. Comparison rates are not calculated for revolving credit products.
The products compared in this article are chosen from a range of offers available to us and are not representative of all the products available in the market and influenced by a range of factors including interest rates, product costs and commercial and sponsorship arrangements
InfoChoice compares financial products from 145 banks, credit unions and other financial institutions in Australia. InfoChoice does not compare every product in the market. Some institutions may have a commercial partnership with InfoChoice. Rates are provided by partners and taken from financial institutions websites. We believe all information to be accurate on the date published. InfoChoice strives to update and keep information as accurate as possible.
The information contained on this web site is general in nature and does not take into account your personal situation. Do not interpret the listing order as an endorsement or recommendation from us. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. If you or someone you know is in financial stress, contact the National Debt Helpline on 1800 007 007.