The Motley Fool

Westpac Banking Corp competing aggressively

The competition amongst Australia’s banks is becoming more and more fierce as the lenders aim to attract new customers in light of the low interest rate environment. In fact, the competition has become so great that Westpac Banking Corp (ASX: WBC) has cut its interest rates on fixed home loans twice in just under a month.

After reducing its three-year fixed loan rates late in January, the bank announced a further 0.04 percentage point cut, as well as a 0.05 percentage point cut for its two-year fixed loan. The latest reductions, which will apply as of Tuesday 25 February, will take their two and three-year fixed rates to 4.84% and 5.09% respectively for customers eligible for package discounts.

In addition, data compiled by mortgage broker AFG last week revealed that Commonwealth Bank of Australia (ASX: CBA), Westpac, National Australia Bank Ltd (ASX: NAB) and Australia and New Zealand Banking Group (ASX: ANZ) were offering discounts of between 0.85% and 0.94% on variable loans. Macquarie Group Ltd (ASX: MQG) has even taken that a step further, offering a discount of 1.01% for loans between $500,000 and $750,000 in value.

Although home buyers are certainly benefiting from the aggressive discounting activity being undertaken by Australia’s largest banks, it is sure to raise flags in Canberra as the Federal Government prepares to undertake the largest review of the financial sector in 17 years, which it has dubbed the “Son of Wallis”. While the bigger banks can afford to compete with lower rates, Australia’s smaller banks, including Bendigo and Adelaide Bank Limited (ASX: BEN), struggle for growth and market share.

Foolish takeaway

It is pleasing to see Westpac addressing concerns that it may have been losing too much ground in the mortgage market as it maintained higher rates than its competitors. Although lowering its rates will impact margins, it is a necessity to ensure market share is not lost.

Out of the major banks, Westpac was the only one to not provide the market with a quarterly or half-yearly report in February.

Attention bank shareholders!

Fact: Australia's large banks had an incredible run in 2013. But some top analysts are saying the trend could stop dead! Get the inside scoop in The Motley Fool's brand-new FREE investment report, "What Every Bank Shareholder MUST Know."

Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.

NEW. Five Cheap and Good Stocks to Buy in 2019…

Our Motley Fool experts have just released a brand new FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.8% fully franked yield…

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.

CLICK HERE FOR YOUR FREE REPORT!