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Major banks pass on cash rate cut

by Charbel Kadib7 minute read

Several lenders, including major banks, have dropped their variable home loan rates in response to the RBA’s monetary policy adjustment. 

All four major banks have now announced reductions across their variable home loan rates, following the Reserve Bank of Australia’s (RBA) decision to reduce the official cash rate by 25bps to 1.25 per cent.

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CBA has passed the full 25bps cut to its mortgage holders, with the changes applying to its owner-occupied and investor variable home loans from 25 June.

This will mean that their owner-occupied (OO) principal and interest (P&I) standard variable rate will start from 5.12 per cent, OO interest-only (IO) standard variable rates will start from 5.67 per cent, investor P&I rates will start from 5.70 per cent and investor IO standard variable rates will start from 6.14 per cent.

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“We have carefully considered the RBA rate decision and the current funding environment, together with how we continue to meet our regulatory commitments, capital requirements and community expectations,” Angus Sullivan, group executive retail banking services, said.

NAB has also passed on the rate cut in full, dropping its variable home loan rates by 25bps, effective from 14 June. 

NAB’s chief customer officer - consumer banking, Mike Baird, said that as a result of its reductions, the bank’s standard variable rate will be the lowest it has been in more than 40 years.

“This will save owner-occupier customers making principal and interest repayments on a $400,000 home loan about $62 per month or $744 per year, which will provide more money in household budgets for other expenses at a time when cost of living remains challenging,” Mr Baird said.

“We strongly believe reducing rates is the right thing to do by our customers and reflects our focus on earning trust in the community and rewarding our loyal existing customers.

“NAB is determined to continue supporting our home loan customers by being a bank they can rely on throughout the lifetime of their loan.”

Mr Baird sought to emphasise that the bank’s response to monetary policy adjustments would vary depending on market conditions, pointing to changes in wholesale funding costs.

“Funding costs have decreased in recent months, reflecting improvements in domestic and offshore wholesale funding market conditions,” Mr Baird added.

“At the same time, the difference between what we charge and how much it costs us to fund a mortgage remains under pressure, given intense competition and increasing deposit costs.

“Decisions like this are never easy, and we need to consider customer, shareholder and community expectations as well as the current economic environment to strike the right balance. Reducing our variable home loan interest rates by the full 0.25 per cent per annum is the right decision today.”

However, unlike CBA and NAB, ANZ has not passed on the full 25bps cut, announcing it will decrease variable home loan rates by 18bps across all its mortgage products, also effective from 14 June.

This will mean that OO P&I standard variable index rates will start from 5.18 per cent, while the OO IO standard variable rate will reduce to 5.73 per cent.

ANZ group executive, Australia retail & commercial, Mark Hand said the bank weighed up a number of factors before making a decision not to pass on the full 25bps cut, including business performance, market conditions and the impact on customers, including depositors.

“While we recognise some home loan customers will be disappointed, in making this decision we have needed to balance the increased cost in managing our business with our desire to provide customers with the most competitive lending and deposit rates possible,” he said.

Westpac gives IO investors 35 basis point rate reduction

Likewise, Westpac also went against the grain of CBA and NAB – but went a step further than ANZ.

While the major bank did not reduce OO loans by the full 25 basis point amount (instead opting to pass on 20 basis points), it went a step further for investor customers with IO loans, giving them a 35 basis point rate reduction.

In addition, Westpac has introduced a new first home buyer special for owner-occupier principal and interest customers with a fixed rate of 3.49 per cent p.a. for five years.

From Tuesday, 18 June, OO P&I SVRs will reduce by 20 basis points to 5.18 per cent, while OOs with IO repayments will see their rate reduce by the same amount to 5.77 per cent.

However, investors with P&I SVRs will see rates reduced by 0.20 per cent p.a. to 5.73 per cent, while investors with IO repayments will see their rates reduced by a generous 35 basis points. This will bring the investor IO SVR down to 6.09 per cent.

Westpac has also said that customers who package their home loan with the Premier Advantage package will receive an additional discount on their home loan rate.

David Lindberg, Westpac’s chief executive, consumer, said that the bank had taken “many factors into account” in making this decision, including balancing the interests of all stakeholders.

“We are operating in a historically low interest rate environment, which creates the opportunity for home owners to get ahead on their repayments. It is also a good time for first home buyers to get onto the property ladder with some of the lowest rates in the history of the Australian mortgage market available,” he said.

“At the same time, we understand there are some people doing it tough despite low interest rates, as growth in both wages and our economy remains low.”

He said that any customers “doing it tough” can seek help through the Westpac Assist service.

Non-bank lender Athena Home Loans and member-owned lender RACQ were also quick off the blocks, passing on the full 25bps cut.  

The co-founder and CEO of Athena, Nathan Welsh, commented: “Athena is passing on the full RBA rate cut to borrowers immediately.

“Borrowers deserve better than the lags by big banks in passing on the benefit.”

[Related: RBA pulls cash rate trigger]

Major banks pass on cash rate cut
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Charbel Kadib

Charbel Kadib

AUTHOR

Charbel Kadib is the news editor on The Adviser and Mortgage Business.

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