Non-major lenders AMP Bank, Citi and ME Bank are among the lenders to reduce standard variable interest rates by 25 basis points.
On Tuesday, 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 on from the lead of non-major banks – such as Macquarie, ING, Bankwest and CUA – AMP Bank and ME Bank have also now committed to reducing rates by 25 basis points.
The banking arm of the wealth giant will drop all variable rate home loans by 0.25 percentage point p.a., effective 21 June for new customers and 24 June for existing customers.
AMP Bank CEO Sally Bruce commented: “AMP Bank is committed to providing competitive rates and being the non-major bank of choice for Australians.
“Our decision to reduce variable home loan rates by 0.25 per cent p.a. was made after careful consideration and is positive news for Australians looking to buy a home, or who are paying down a home loan, with interest rates now at new historic lows.”
AMP said that the rate reduction would mean that customers with a current interest rate of 4.04 per cent would therefore see their rates drop to 3.79 per cent, reducing the minimum monthly repayment by $72 on a $500,000 home loan – equating to a saving of $864 a year.
ME Bank has also said that its 25bps reduction will apply for all existing variable home loan customers from 27 June 2019.
The bank did not provide further commentary around its decision to do so.
Citi is also passing on the full RBA rate cut to its clients, reducing the portfolio interest rate on all residential variable rate home loans by 0.25 percentage point, effective from 25 June 2019.
Meanwhile, Bendigo Bank has said that it would decrease its variable interest rates by 0.20 percentage point p.a. for all new and existing owner-occupier and investor principal and interest loan customers. However, customers with IO SVRs will see rates drop by 15 basis points.
Echoing the comments of ANZ CEO Shayne Elliott, Bendigo Bank managing director Marnie Baker said the decision aims to “strike a fair balance” for the bank’s stakeholders.
“When setting interest rates, we must consider the needs of all our stakeholders: customers, shareholders, partners and the broader community and carefully balance the interests of both borrowers and depositors.
“We’re operating in a record-low interest rate environment. When reviewing any decision on rates, we must also ensure our pricing is competitive with the market, provides the appropriate platform for sustainable growth and enables us to continue to support the hundreds of communities we service nationwide.”
Bendigo’s interest rate changes will be effective from 28 June 2019.
Pepper Money and Aussie Home Loans
Outside of the non-major banks, several other lenders have also announced full rate cuts.
Likewise, Pepper Money has said that it will reduce interest rates on its residential home loans by 0.25 percentage point per annum to new and existing Pepper customers with SVR loans from 24 June.
“Pepper’s core purpose is to help people succeed, and the Reserve Bank’s rate cut has provided us with an opportunity to pass on a real benefit for our customers,” said Mario Rehayem, Pepper’s CEO.
“Reducing our interest rate by 25 basis points is the right thing to do in the current market. While our interest rate decisions are shaped by a number of factors, including wholesale funding costs and the broader economic environment, we were pleased to be able to make this decision for our customers today.”
Mr Rehayem added: “We help customers from diverse financial backgrounds find the best tailored solution for their individual situations, and this decision enables Pepper to offer them even better value to our customers, empowering them to continue saving, strengthening their financial standing, and moving towards their individual financial goals.”
As well as ME Bank and Pepper, CBA-owned Aussie Home Loans has also said it would pass on the full 25 bps cut to customers (as its parent company had).
The Aussie Select variable rate changes will be effective from 27 June 2019, with Aussie IQ, Aussie Optimizer and historical Aussie products rate changes effective from 21 June 2019.
David Smith, Aussie’s chief customer officer, said the decision was an easy one: “We’re happy we can put 0.25 [percentage point] back into our customers’ pockets, especially at a time of low wages growth. And with experts predicting further cuts by the RBA this year, rates could drop lower still.
“Savvy home owners should use these cuts and historically low interest rates to their advantage and get ahead on their mortgage repayments. By keeping repayments at pre-cut levels, the higher repayments will help home owners reduce the amount of interest paid over the life of their loan and pay it off sooner,” Mr Smith said.