Big banks react to cash rate call

“While the circumstances of each RBA rate decision will always vary, we’ve carefully considered the current environment and the needs of both borrowers and savers,” said Matt Comyn, CBA's group executive retail banking services.

“Today we’ve reduced our mortgage rates to a record low while increasing term deposit rates to provide an opportunity to the millions of Australians who rely on savings," he said. 

To meet the needs of savers, Commonwealth Bank will increase one, two and three-year term deposits with all rates set to rise to 3.0 per cent or greater.

“Given increased funding costs and capital requirements, today’s announced changes seek to balance the needs of both customers and shareholders,” Mr Comyn said.

Business customers with variable rate products will also benefit from a 0.13 per cent rate reduction.

CBA rate changes:

Meanwhile, NAB will cut rates by 0.10 per cent per annum, effective from Friday 19 August 2016. This means NAB’s Variable Rate for Home Loans (Standard Variable Rate) will reduce to 5.25 per cent.

NAB will also reduce the NAB Homeplus Rate, available through NAB Broker, by 10 basis points to 5.28 per cent, effective from Friday 19 August 2016.

NAB chief operating officer, Antony Cahill, said the major lender had carefully considered the needs of customers and shareholders and the current economic and regulatory environment in making this decision.

“We have had to strike the right balance between providing customers with competitive mortgage rates and continuing to generate attractive returns for our 584,000 shareholders, while recognising that NAB’s funding costs have been steadily increasing due to a range of factors, including the need to strengthen our balance sheet,” Mr Cahill said.

“We also need to be able to continue investing in the products and services our customers want.”

“We understand some customers want to have certainty about their monthly repayments and that’s why we offer a number of highly competitive fixed-rate terms which allow customers to lock in interest rates for all or part of their home loan,” Mr Cahill said.

Also, from Monday 8 August, NAB will increase its interest rate on 8-month Term Deposits by 0.85 per cent p.a., introducing a Blackboard Special of 2.90 per cent p.a. (interest paid at maturity).

NAB will also reduce its rate for standard variable business rate lending products by 0.10 per cent, effective from Friday 19 August 2016.

ANZ became the latest major bank to announce a reduction. The bank’s Standard Variable Rate Indices for Residential Home Loan products will decrease by 12 basis points.

ANZ will also increase the rate on its one and two-year term deposits by up to 0.75 per cent pa.

“This was a considered decision that balances the expectations of our home loan customers to keep lending rates as low as possible, while also supporting our savings customers who help fund our lending,” ANZ Group Executive Australia Fred Ohlsson said.

“Regulatory and funding costs have continued to rise and we need to remain attractive to depositors,” he said.

“We are pleased however that home loan customers can still benefit from these historically low interest rates and that we have maintained a competitive rate for both owner occupiers and investors.”

[Related: RBA makes cash rate call]