Bank of Sydney, Heritage Bank and Pepper Money have announced rate reductions following the RBA's July cash rate decision, with ANZ and NAB also announcing changes to savings rates.
On 2 July, the Reserve Bank of Australia (RBA) lowered the official cash rate to a new record low of 1 per cent, marking the second month in a row in which the cash rate had moved following nearly three years of inertia.
The adjustment provoked an immediate response from some players in the mortgage market, but announcements are still rolling out from the non-major and non-bank segment.
Bank of Sydney
One of the most recent rate cut announcements is from Bank of Sydney, whose head of third party distribution, Steve Sampson, said the lender would reduce variable rates by 19 basis points from 23 July.
This would bring the BoSBasic Owner Occupied P&I Home Loan variable interest rate to 3.11 per cent p.a. (for loans with an LVR up to 90 per cent), Owner Occupied Expect More Home Loan will reduce to 3.27 per cent p.a.
Mr Sampson commented: “Bank of Sydney is a market leader in home loan interest rates and we intend to keep that position whilst at the same time offering Australian borrowers and their brokers highly competitive and effective products for the betterment of all.”
He added that the bank has also recently reduced investment interest rates, adding: “These reductions confirm our support of the broker market and our customers; we are expecting a big uptake.”
While Heritage Bank has said that it will be reducing interest rates on personal loans and credit cards by 25 basis points, it will only be passing on 15 basis points to its variable rate borrowers from Thursday (18 July).
That means the lowest rate now available on a variable home loan with Heritage will be 3.42 per cent.
However, Heritage will cut its fixed rate home loans by up to 0.30 percentage point.
CEO Peter Lock said that the bank had passed on “as much of the rate cut as it was possible to absorb without impacting on the best interests of members”.
He added that the lender was also minded to “balanc[e] the needs of both borrowers and investors, as well as the long-term best interests of Heritage as a whole”.
Mr Lock commented: “It’s important to remember that the RBA cash rate is only one of a number of variables that affect the costs we incur to fund our lending.
“Just because the RBA cuts the cash rate by a certain amount, that does not mean our costs automatically fall by the same amount,” he said.
Mr Lock continued: “We must maintain the financial strength that our members demand and that we pride ourselves on delivering.
“We must also consider the interests of depositors, such as self-funded retirees and pensioners, who depend on the interest they receive from us, as well as borrowers.
“Our decision on interest rates represents a balanced approach, with consideration given to the impacts on all of our members.”
Pepper Money has now announced that it will reduce the variable interest rate for existing customers by 20 basis points from 22 July.
This is in addition to the 0.25 percentage point rate cut Pepper Money announced last month.
However, the lender added that it was still “considering its position in relation to the RBA’s July rate cut and the interest rates [it] will offer to new customers”.
The lender said it would update the broker market once a decision has been made.
Savings rate changes
While ANZ had previously announced it would pass the full 25-basis-point rate cut onto its variable home loan customers, it has now cut its Progress Saver by the same amount and its Online Saver account by 0.15 percentage point.
Meanwhile, NAB has reduced its savings rates by 19 basis points, as previously suggested.
Earlier this month, the bank’s chief customer officer, consumer banking, Mike Baird, outlined that the lender would reduce its variable mortgage rates by 19bps across all home loan products from 12 July.
He said at the time that the bank would not lower savings rates by more than 19bps for any subsequent reductions to the cash rate.
Mr Baird commented at the time: “Decisions like these are difficult and reflect the current unique circumstances, with home loan rates at record lows at the same time as deposit and savings rates also being at record lows,” he added.
He continued: “Getting the balance right is an ongoing challenge for banks, and with 9 million customers, making the right decisions for our customers matters for the Australian economy.”
RateCity research director Sally Tindall said ANZ and NAB’s intro rate savings accounts now earned next to nothing after the honeymoon rate finishes.
“NAB is now offering an ongoing rate of 0.11 per cent on its Reward Saver account, while ANZ is offering a rate of 0.15 per cent on its Online Saver account. Customers can do better than this,” she said.
“NAB and ANZ were first of the big four out of the blocks this time with cuts for savers, but Australia’s two biggest banks are unlikely to be far behind. The question is not if they will cut, but when and by how much.
“Given that CBA and Westpac didn’t pass on the full cut to home loan customers, it’ll be interesting to see what they do to their savings accounts,” she said.
[Related: Non-majors lower mortgage rates]
Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.
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