First major moves on rates

Two days after the RBA Board made its announcement the first full 25 basis point rate cut has been delivered by one of the big four banks.

ANZ today announced it will lower interest rates for variable rate mortgages and small business lending by 0.25%pa. Effective 16 December 2011, ANZ’s new standard variable mortgage rate will be 7.30%pa (7.40%pa comparison rate). New small business rates are also effective from 16 December.

ANZ will also offer a special 2-year fixed term mortgage at 5.95%pa available from 12 December – a reduction of 0.20%pa on the current 2-year rate and 1.35%pa lower than ANZ’s new standard variable rate - allowing home borrowers to lock in the benefit of market expectations of further reductions in interest rates.

As yet there has been no word from the other big banks however there are no guarrantees that every lender will follow suit.

ANZ CEO Australia Philip Chronican said “We know many people in the community are doing it tough at the moment and, on this occasion, we felt that a decision to reduce interest rates by 0.25%pa for home borrowers and for small business was the right one in the circumstances.

“In the face of the economic and banking crisis in Europe, our decision on the size of the interest rate change has been one of the most difficult we have made in recent times," Mr Chronican said.

“Retail banking margins have been contracting as the cost of funds has progressively risen over the last six months. Bank funding costs are now largely unrelated to movements in the Reserve Bank’s Official Cash Rate," he said.