Banks are dropping their interest rates in fierce competition to win new customers. RateCity.com.au data shows that despite the Reserve Bank cash rate remaining at 0.25%, 19 lenders cut at least one variable home loan rate, and 22 lenders cut at least one fixed home loan rate, in the last month. Competition in the home loan market means an average borrower taking out a $400,000 home loan at the lowest two-year fixed rate today, compared to a year ago, would pay $7,344 less in interest over the two-year fixed period, a RateCity statement says.

“It’s been a record-busting month for mortgages as lenders leapfrog each other in a bid to offer the lowest-rate home loans,” says Sally Tindall, research director at RateCity.com.au”. “With refinancing on the rise, lenders have to keep whittling down their rates if they want to be in contention for these borrowers.” Data from the ABS shows the number of external refinances increased by 29% from April to May, and rose 63% year-on-year.