Non-bank lender Aussie Home Loans has dropped its standard variable mortgage interest rate by a further 40 basis points, on top of a 50-basis-points cut before last week’s change to the official cash rate.

That takes Aussie Home Loans’ variable rate to 7.65 per cent.

The mortgage broker also announced it was reducing its basic variable rate for first home buyers to 6.99 per cent.

The Reserve Bank of Australia (RBA) cut its official cash rate by 75 basis points last week, but retail banks only lowered their standard variable rates by between 58 and 65 basis points, blaming high funding costs caused by the global financial crisis.

Executive chairman John Symond says Aussie’s 7.65 per cent rate is below the big four banks and will lead to increased competition.

“The big winners from the rate drops are consumers, who will enjoy renewed competition among the major lenders in the market,” Mr Symond said in a statement.

“Our first home buyer rate at under seven per cent should also provide a much needed stimulus to the housing sector.”

The rate change is effective for new and existing borrowers from tomorrow.

AAP