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Australia’s 'most trusted bank' cuts interest rates as pressure on 'out of touch' RBA mounts

Bendigo and Adelaide Bank have become the latest big-name lender to adjust mortgage rates.

Stewart Perrie
·Senior Journalist
Updated ·7-min read
Bendigo and Adelaide Bank staff waving in the air next to a photo of Michele Bullock
Bendigo and Adelaide Bank has announced it will drop its interest rates from September 20, which will put added pressure on the Reserve Bank of Australia. (Source: Instagram/Getty)

Bendigo and Adelaide Bank has become the latest Aussie bank to drop interest rates. A slew of big-name lenders have slowly but surely been adjusting their rates as the Reserve Bank of Australia (RBA) comes under increasing pressure amid the cost-of-living crisis.

Mozo personal finance expert Rachel Wastell told Yahoo Finance the recent cuts made it “increasingly clear” that we were likely at the peak of the RBA’s rate hiking cycle. Bendigo and Adelaide Bank said its one- and two-year fixed rates for owner-occupiers will fall by 0.45 per cent on September 20.

“Bendigo and Adelaide Bank continues to carefully consider the impact of interest rates on our home loan customers, with today’s change providing an attractive fixed rate alternative," Acting Chief Customer Officer Consumer Banking, Dennis Teale, said.

"As Australia’s most trusted bank, we understand the impact higher interest rates can have on households and have a team standing by to help our customers with any concerns.”

In addition to Bendigo and Adelaide Bank, Bankwest has cut interest rates on most of its fixed-rate loans by up to 0.5 per cent. Customers have been offered a 5.89 per cent rate on its two and three-year fixed rates for loan-to-value ratios (LVR) of 80 per cent or less.

ubank has lowered interest rates on selected fixed-rate loans with cuts of up to 0.73 per cent.

Do you have a story? Email stew.perrie@yahooinc.com

Borrowers can get a 5.79 per cent rate for two, three and five-year fixed rate terms with an LVR of 80 per cent or less. The bank also cut its flex variable interest rate by up to 0.10 per cent.

ING cut its fixed rates by up to 0.60 per cent. It's offering a 5.84 per cent rate for two, four and five-year fixed rate terms for borrowers with an LVR of 80 per cent or less.

The bank also shaved 0.05 per cent off variable rates for borrowers with LVRs between 80 to 90 per cent.

Meanwhile, Mozo found Macquarie cut its fixed rates by between 0.10 and 0.66 per cent. It is offering a 5.69 per cent rate for 2- and 3-year fixed rates with a LVR of 80 per cent.

Other banks that cut rates included Bank of Sydney, Gateway Bank, Greater Bank, Heritage Bank, IMB Bank, ME, Newcastle Permanent, People’s Choice, Police Bank, Southern Cross Credit Union and Teachers Mutual Bank.

The RBA has been under intense pressure to drop the official cash rate as Aussies continue to struggle under the 12-year high rate of 4.35 per cent, which has been in place since November last year.

The central bank has been insistent that rates won't start to fall until inflation drops into the 2 to 3 per cent target zone.

Annual trimmed inflation, which is the average rate of inflation and removes the impact of temporary or irregular price changes, was 3.8 per cent in July, down from 4.1 per cent in June.

But economist and Yahoo Finance contributor Stephen Koukoulas wrote in an op-ed that the RBA shouldn't be using trimmed inflation as a factor when determining interest rates.

"If the RBA were to place a higher weight on the actual inflation rate — not the trimmed mean measure — it would be cutting interest rates like the bulk of the central banks around the world," he said.

"Inflation is in target and could fall further through 2025 as the economy limps along. The RBA may change its tune in the months ahead.

"The hard reality of the September quarter inflation rate coming in at 2.5 per cent or thereabouts, with the unemployment rate spiking above 4.5 per cent before year end could well be straws that break the RBA to deliver the rate cuts the markets continue to price in."

The RBA faced even more scrutiny following recent gross domestic product figures that showed the Aussie economy grew by just 0.2 per cent for the June quarter.

"GDP figures show a slowing economy, there is also a lack of growth in trend terms in household spending, an increase in mortgage arrears and a drop in job vacancies,” Wastell explained to Yahoo Finance.

“All of these indicators suggest that it is likely the RBA’s next move will be to cut rates, rather than raise them further.

“We can see this reflected in the recent cuts to home loan rates, particularly longer term fixed rates - where banks have the most opportunity to offer comparably low rates now that will most likely end up higher than variable rates during those fixed terms.”

The central bank has been slammed over recent comments about Australia's employment numbers.

RBA assistant governor Sarah Hunter remarked this week about how impressive the job market is at the moment.

“Our current assessment is that the labour market is operating above full employment but has moved towards better balance since late 2022,” she said.

The RBA has said that in addition to having inflation between 2 to 3 per cent, it is also keen on maintaining employment just at a full level.

Australian Manufacturing Workers Union national secretary Steve Murphy is worried Hunter's remarks are a subtle way of saying "workers should get the sack and pay the price for an economy that is being heated up by greed”.

“This is very clear that the RBA is out of touch,” he said.

“Working people are struggling and under a cost-of-living crisis that’s been caused by price gouging by big corporations using their market share to rip us off.”

Wastell expects “more rate cuts will be coming through from the banks”, particularly in the fixed rate space.

NAB was the first Big Four bank to cut fixed rates in July, with CBA and Westpac following suit in August.

“As the economy cools and the RBA moves closer to cutting rates, lenders are likely to sharpen their deals to attract borrowers,” Wastell told Yahoo Finance.

“One bank we are keeping our eyes on is ANZ, as they are the only Big Four Bank who has not cut fixed rates since NAB started with its three-year fixed rate cut back in July.”

Wastell said the decision of whether or not to fix was a “balancing act”. It could give you peace of mind and protect you from future rate cuts, or you could miss out on savings down the track should rates drop.

“With the chance of further rate cuts on the horizon, variable rates could very well drop below the lowest fixed rates on offer, so you could be stuck paying a higher rate after the RBA starts the cutting cycle,” Wastell said.

“If you’re on the fence, splitting your loan between fixed and variable rates could be the way to go.

“This option gives you the stability of a fixed rate, while still letting you take advantage of any drops in variable rates.”

  • Commonwealth Bank: November 2024

  • Westpac: February 2025

  • ANZ: February 2025

  • NAB: May 2025

Commonwealth Bank is the only one of the Big Four banks still predicting a rate cut to come this year and stood firm on that forecast even after the RBA kept rates on hold at its August meeting.

The central bank is set to hold its next meeting to discuss interest rates on September 23.

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