Majors cut rates in wake of RBA announcement

by John Maguire04 May 2016
Within minutes of the Reserve Bank of Australia announcing its cash rate cut, NAB revealed it would pass on the reduction to customers in full.

Yesterday the RBA cut its rate by 0.25 basis points to a historic low of 1.75%, in the first rate change since May 2015.
NAB moved fast to announce its own rate cut, posting on Twitter that the bank would reduce its standard variable interest rate on owner-occupier home loans from 5.6% to 5.35%. The standard variable rate for investors will fall from 5.75% to 5.5%.

“The circumstances of each decision will always vary and we must take into account factors such as competition, regulatory capital requirements and funding costs," said NAB executive Gavin Slater.
"Today's decision balances the needs of our home loan customers with our shareholders."

NAB’s announcement signals a $47 saving on the average monthly home loan repayment, based on a $300,000 loan over a 30-year term.

Following NAB's move, Westpac, ANZ and CBA also announced home loan rate cuts overnight. Westpac and CBA passed on the rate cut in full, announcing a 25 basis point reduction in standard variable home and investment loans, effective 23 May and 20 May, respectively. 

Meanwhile, ANZ announced it won't pass on the RBA's cas hrate cut in full, reducing its standard variable home loan rates by 19 basis points. ANZ group executive Australia Fred Ohlsson says this decision was made due to increased wholesale funding costs. 

“The background is that wholesale funding costs have again been rising in recent months. While we’ve absorbed this for some time and taken steps to reduce costs in our own business, higher funding costs mean we are only in a position to pass on a portion of the reduction in the cash rate to our customers," Ohlsson said.

Westpac subsidiaries St George, BankSA and Bank of Melbourne also announced standard variable rate reductions of 25 basis points on both owner-occupied and investment home loans.

The Bank of Queensland (BoQ) will also pass the reduction on to customers, announcing on Monday afternoon that variable home loans for owner-occupiers and investor customers will be cut by 25 basis points.

While funding markets remain volatile, we have made the decision to lower our rates to ensure we maintain the right balance between growth, risks and margins over the longer term while also considering the needs of our customers," said BoQ CEO, Jon Sutton.

Meanwhile, John Kolenda of 1300 Home Loans has said that is not a given that banks will pass on the rate cut, and that rate hikes from lenders remain a possibility.

“We could again see banks increasing rates outside of the RBA’s deliberations or failing to pass on any reductions in full,” said Kolenda. “This will make it even more vital to review any existing home loans because there will be potentially a greater saving.”