A non-major bank and a credit union have both announced that they will reduce standard variable interest rates by 25 basis points later this month.
On Tuesday afternoon (4 June), the Reserve Bank announced that it was dropping the official cash rate for the first time in almost three years in order to “support employment growth and provide greater confidence that inflation will be consistent with [its] medium-term target”.
Commonwealth Bank and National Australia Bank both committed to reducing their SVRs by 25 basis points, while ANZ and Westpac said they would reduce rates by 18 basis points and 20 basis points, respectively.
Following the lead of non-major banks Macquarie and ING, Bankwest and CUA have also both now committed to reducing rates by 25 basis points.
Effective 25 June, Bankwest will reduce home loan interest rates on standard variable rate (SVR) mortgages by 0.25 percentage point per annum.
This will mean that the new owner-occupier principal & interest (P&I) rate will be 5.32 per cent, the new OO interest-only (IO) rate will be 5.67 per cent, while investor loans with SVR mortgages and P&I repayments will have a new rate of 5.97 per cent, and those with IO repayments will drop down to 6.22 per cent.
According to the bank, the rate cut means that the minimum required monthly repayment amount will reduce by $62.56 each month, based on a mortgage of $400,000 for an OO P&I loan.
Bankwest executive general manager, customer solutions and insights, Pieter Vorster said: “Following the RBA’s rate decision, Bankwest is reducing its home loan interest rates on standard variable rate mortgages accordingly.
“We appreciate the impact home loan rates have on both existing customers and future home owners, which is why we’re lowering our standard variable rates in line with the official cash rate.”
As well as Bankwest, credit union CUA announced that it would be dropping rates across all owner-occupied and investor home loans from Tuesday, 18 June.
A 25-basis point reduction will apply to most CUA home loan products including the SVR, discount variable and CUA’s Fresh Start home loans, which collectively cover around 80 per cent of CUA borrowers.
However, the credit union said that reductions of between 0.10 percentage point p.a. and 0.15 percentage point p.a. will be applied to its Accelerate and Balance variable home loan products.
The change will take the OO P&I repayments to 3.50 per cent p.a. for Balance Variable and 3.69 per cent for Accelerate Variable loans.
CUA will also make some changes to interest rates on its seven saving products, ranging from a reduction of 5 basis points to 30 basis points, effective 18 June.
“Market forces, rather than the RBA cash rate, are the primary driver of CUA’s funding costs,” CEO Rob Goudswaard said.
“However, being a mutual, CUA’s focus is on acting in the best interests of all members, which means we have decided to distribute the rate changes as equitably as possible across our broad portfolio of accounts.
“This will ensure every CUA member with a variable rate home loan will benefit and continue to enjoy highly competitive rates, while we are also shielding many savers from the full impact of the rate cut.”
Mr Goudswaard continued: “Our lending margins are among the tightest in the market, and this decision ultimately impacts profitability. But in keeping with our mutual ethos, CUA is returning value to a large proportion of our members, while still enabling us to make significant ongoing investments in service improvements and digital offerings that members expect.”