Australian lenders are defying the Reserve Bank and creating their own rate cuts for mortgage holders, as competition among the banks heats up.

In a surprising move, 18 lenders have announced they are reducing variable home loan offerings for customers.

Canstar data insights director Sally Tindall says lenders are simply trying to undercut each other on price.

“Competition among lenders continues to create opportunities for some households to cut their borrowing costs,” she said.

“Negotiating with your lender can get you on your way, but the bigger gains still typically come from refinancing.”

Ms Tindall said the most notable move was Bendigo Bank which cut its slowest variable rate for refinances by 15 basis points to 5.89 per cent.

She says there are now 15 lenders with rates below 5.9 per cent.

Fixed rates also edged lower, with five lenders coming to market with a reduction in their offering to potential mortgage holders.

AMP Bank led the cuts, slashing some fixed rates by as much as 50 basis points.

The change in home loan rates comes despite the Reserve Bank of Australia’s monetary board voting unanimously to leave the cash rate at 4.35 per cent at its June meeting, even though Australia still has an inflation problem.

The Australian Bureau of Statistics said headline inflation came in at 4.0 per cent for the 12 months until May, down from 4.2 per cent in April.

The cooling of inflation came largely due to a temporary halving in the fuel excise from the Australian government with automotive fuel prices falling 11.9 per cent in May, after decreasing 7.0 per cent in April.

Meanwhile, the all-important trimmed mean inflation rate, which the RBA watches carefully as it strips out volatile items such as fuel, was 3.6 per cent for same period.

This was a 0.4 per cent increase in May, up from 0.3 per cent in April.

RBA governor Michele Bullock delivered a blunt warning at the press conference after the announcing rates would be left on hold.

“I want to be very clear that inflation remains too high,” she said.

She said rate hikes remained on the table “if that is what is required to bring inflation down”

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Experts split on future rate calls

Experts are largely torn between the future path for the Reserve Bank as it is forced to choose between slowing above target inflation against stalling economic growth.

HSBC chief economist Paul Bloxham expects an “extended pause” in part due to a cooling housing market.

“Although the RBA does not target housing prices, the housing price correction will have implications for monetary policy,” he said.

“Our central case is for housing prices to decline in H2 2026 and fall by 2-6 per cent over 2027”

“At some level, the cooling housing market will be helpful for the RBA if it slows down consumer spending, as this will also help to take some more pressure off inflation, which is too high.

Meanwhile three of the four major banks believe interest rates will be held until 2027.

Commonwealth Bank expects the RBA will be on hold for the rest of 2026, although it conceded that rates may need to change should inflation continue to rise.

NAB expects the RBA to remain on hold before gradually cutting from the second quarter of 2027, while ANZ expects two cuts in 2027.

Westpac is the only big four bank that is tipping two more interest rate hikes before the Reserve Bank pauses for a year.

Westpac chief economist Luci Ellis warns the Reserve Bank is still likely to hike interest rates this year given inflation remains too high.

“We still regard our two-hike track as the most appropriate base case view, given the inflation outlook,” Dr Ellis on Friday said.

She pointed to a number of factors that could keep inflation higher, including a “significant pass-through from higher fuel costs into some other prices” and the bigger-than-expected increase in award wages.

“If we are right about the inflation profile from here, the RBA will be surprised on the upside,” she said.

“We therefore retain our view that further rate hikes will occur in the following meetings (in August and September).”