CUA offers 62 basis point average discount to major banks with 5.85% standard variable rate

Credit Union Australia (CUA) has cut its standard variable rate by 20 basis points with a new rate of 5.85% kicking on December 13.

The new rate is 53 basis points below NAB’s standard variable rate of 6.38% ( from December 10), the lowest of the major banks followed by Commonwealth Bank (6.4% from December 10), Westpac (6.51% from December 17) and ANZ, which will announce its rate decision next Friday, at 6.6%.

This equates to an average discount of 62 basis points to the major banks – saving borrowers more than $100 a month in mortgage repayments for a standard $300,000 home loan taken out over 25 years.

CUA’s general manager for products and marketing Jason Murray says operating a customer-owned model enables the mutual lender to provide lower rates over the long term as they continue to focus entirely on customers rather than shareholders.

“CUA’s customers are already saving and gaining the benefits of our lower rates. The current standard variable home loan (SVHL) rate cut of 20 basis points ensures we remain over 50 basis points cheaper than the average of the SVHL rates offered by the big four banks – a gap we’ve maintained continuously for over two years now,” he says.

CUA’s new rate of 5.85% has a comparison rate of 5.91% and has no ongoing fees, extra payments can be made at any time without penalty and it includes a 100% mortgage offset account.

Another mutual lender, Heritage Bank (formerly Heritage Building Society), has cut its variable home loan interest rates by 20 basis points to 6.14%, effective from December 14. 

Heritage Bank CEO John Minz said Heritage’s standard variable home loan remained extremely competitive, well below the rates offered by the big banks.

”Unlike the big banks, we don’t have to target bigger profits to pay dividends to shareholders, so we can keep our rates lower, As a customer-owned bank, our motivation is to always provide the best possible rates we can,” he says

However, as with other lenders, Minz says Heritage has to take into account the high costs of funding and the need to meet long-term capital and liquidity requirements 

Minz says it is also important to remember that Heritage also had to consider the interests of investors.

“Cutting home loan interest rates has a flow-on effect that also reduces the interest payments that investors receive.

“We have many customers, such as self-funded retirees, who rely on the interest income they receive from their investments to fund their living costs.

“It’s important that we keep in mind the needs of all customers when we make these decisions," he says.