The country’s two biggest banks have cut interest rates for home loan customers, with the Commonwealth Bank of Australia matching the Reserve Bank’s reduction and Westpac giving customers a slightly bigger rate cut.
CBA was the first of the big four banks to pass on Tuesday’s interest rate cut to home loan customers, reducing its standard variable rate (SVR) by 0.25 percentage points to 5.65 percent.
Westpac has cut its SVR by 0.28 percentage points to 5.7 percent, its level lowest since 2009. For a $300,000 mortgage, this will lower monthly loan repayments by $52 a month, Westpac said. St George Bank, which is owned by Westpac, also cut its standard variable home loan rate, by 25 basis points to 5.74 percent.
New Westpac chief executive Brian Hartzer, who started on Monday, had faced calls to cut by more than the RBA because Westpac has held the highest SVR of the big four for several years, and there are concerns this could deter some customers.
“Today’s rate reduction is good news for homeowners and will improve the faith in Australia’s economic outlook and provide a necessary boost to consumer and business confidence,” said Jason Yetton, the bank’s group executive of Westpac retail and business banking.
The announcement came after Treasurer Joe Hockey on Wednesday upped the pressure on the big four banks to pass on the RBA cut to all customers.
In an interview on ABC radio on Wednesday morning, Mr. Hockey said: “the flow-through to the Australian economy is significant, and importantly it must be immediate”.
“I say again to the Australian banks pass it on in full now, not just to home owners, but importantly small business and credit cards as well.”
CBA and Westpac have not said whether rates on business loans and credit cards will be reduced. According to aggregated lending data from the Reserve Bank of Australia, interest rates on credit cards have increased by 25 basis points in the 18 months since the RBA last cut rates and historically have not fallen with cash rate cuts. The RBA data shows 3-year loans to small business have fluctuated outside cash rate movements and are 40 basis points lower since the last cash rate cut in August 2013.
CBA on Wednesday said it will reduce its standard variable rate by 0.25 percent from February 20. Its 3-year and 5-year fixed rate products will also be reduced by 0.25 per cent and 0.30 per cent respectively.
CBA group executive for retail banking services, Matt Comyn, said the new standard variable rate of 5.65 percent is the lowest in five years. CBA said home owners would save $48 a month, based on the average mortgage of $300,000.
CBA has reduced the variable rate on its home loans by 2.16 percentage points since November 1, 2011, the bank said, equating to a saving of $430 in monthly repayments on a home loan of $300,000.
ANZ Banking Group said it will make its decision by Friday as part of its monthly interest rate review.
Under a policy previously announced, ANZ takes into account five key factors when assessing rate levels: the cost of wholesale funding; the impact of economic conditions on customers; competitive positioning; ensuring attractive returns for depositors; and the regulatory requirement to operate safely and securely for customers.
National Australia Bank is still considering its position, a spokesperson said.
Bank of Queensland, ME Bank and ING Direct moved on Tuesday to cut their standard variable home loan rates by the full amount of the RBA cut.