Within hours of the RBA’s decision to reduce the cash rate by 25 basis points, each of the big four banks announced cuts to home loan interest rates.
Both the Reserve Bank Governor Philip Lowe and Federal Treasurer Josh Frydenberg had strongly encouraged the country’s biggest banks to pass on the cash rate cut to home loan interest rates in full.
Yet only Commonwealth Bank and NAB acquiesced to passing on the full 25 basis point rate cut to all variable rate home loans, with ANZ and Westpac opting to pass on smaller cuts of 18 and 20 basis points, respectively.
With almost $1.4 trillion in housing loans combined between them, the loan books of the big four banks account for the vast majority of the home loan market, which is why their passing-on of the rate cut is so important.
Here’s exactly what each of the major banks cut their home loan interest rates by, and their justification for doing so.
ANZ interest rate cuts
ANZ was the first big bank to move, slashing its interest rates almost immediately following the 2.30 pm announcement.
But it did not pass on the full 25 basis points, instead cutting variable home loan rates by 18 basis points.
According to ANZ:
- Standard variable rate owner occupiers paying principal and interest will have their rates reduced to 5.18%pa, from 5.36%pa.
- Standard variable rate owner occupiers paying interest only
will have their rates reduced to 5.73%pa, from 5.91%pa.
What they said
ANZ Group Executive, Australia Retail & Commercial, Mark Hand said ANZ had weighed a number of factors and the impact on depositors in making this decision.
“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 competitive lending and deposit rates,” Mr Hand said.
“Home loan customers looking for certainty with their repayments can look to lock in our historic low fixed rate home loans for our two and three-year terms.”
Commonwealth Bank interest rate cuts
CommBank was the second big bank to respond, and the first of them to announce it was passing on 100% of the rate cut.
By cutting variable rates by 25 basis points, the new rate for CommBank’s owner occupied principal and interest variable product will be 5.12% p.a.
Other changes, effective from 25 June 2019, are:
- The owner-occupied interest only standard variable rate home loan cut by 0.25% to 5.67%;
- The investor principal and interest standard variable rate home loan cut by 0.25% to 5.70%;
- The investor interest only standard variable rate home loan cut by 0.25% to 6.14%.
What they said
According to Angus Sullivan, Group Executive Retail Banking Services:
“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.”
NAB interest rate cuts
NAB also announced it was passing on the full rate cut of 25 basis points to all variable rate products.
The following changes will apply from Friday 14 June 2019:
Current Advertised Rates
|Advertised rate as at|
Friday 14 June 2019
|Owner Occupier Principal and Interest||5.36% p.a.||5.11% p.a. (-0.25% p.a.)|
|Investor Principal and Interest||5.96% p.a.||5.71% p.a. (-0.25% p.a.)|
|Owner Occupier Interest Only||5.93% p.a.||5.68% p.a. (-0.25% p.a.)|
|Investor Interest Only||6.41% p.a.||6.16% p.a. (-0.25% p.a.)|
NAB also noted it has recently dropped rates on several of its fixed home loans, including the First Home Buyer special rate of 3.49% for two years.
What they said
NAB was slightly more vocal than ANZ and CommBank, giving plenty of justification for their rate cuts.
According to NAB Chief Customer Officer – Consumer Banking, Mike Baird, NAB’s rate cuts leave its standard variable rates at the lowest they’ve been in more than 40 years and could save customers more than $700 per year.
“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,” Mr Baird said.
“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 also said NAB will continue to monitor the competitive environment to ensure its products represent value for customers.
“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,” he said.
“Reducing our variable home loan interest rates by the full 0.25% per annum is the right decision today.”
Westpac interest rate cuts
Westpac was the last of the big four to announce changes following the RBA’s announcement, and like ANZ, it has not passed on the full 25 basis point rate cut.
It has, however, cut rates by more than ANZ’s 18 basis points, reducing variable rates by 20 basis points for owner-occupiers.
In addition, Westpac also announced it was cutting interest-only rates for investors by 35 basis points – more than the cash rate movement – and has also introduced a new fixed five-year first home buyer product at a rate of 3.49%.
The following interest rate changes will come into effect on Tuesday 18 June 2019.
- Variable home loan (owner occupier) rate has been reduced by .20% p.a. to 5.18% p.a. for customers with principal and interest repayments.
- Variable residential investment property loan reduced by .20% p.a. to 5.73% p.a. for customers with principal and interest repayments.
- Variable home loan (owner occupier) rate reduced by .20% p.a. to 5.77% p.a. for customers with interest-only repayments.
- Variable residential investment property loan rate reduced by .35% p.a. to 6.09% p.a. for customers with interest-only repayments.
What they said
Westpac Chief Executive David Lindberg said Westpac took many factors into account for its decision, including 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,” Mr Lindberg said.
“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.
“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.”
ANZ cops it from the Treasurer, Reserve Bank
Despite his strong recommendation that the banks pass on the rate cut in full, ANZ, the first big bank to move, did not.
And Treasurer Josh Frydenberg is not happy about it, saying yesterday that ANZ had “let down its customers”.
“I am very disappointed with the decision the ANZ has taken today,” Mr Frydenberg said.
“We heard from the royal commission that the banks were putting profits before people. Actions like this don’t give the Australian people any comfort that the banks have changed their behaviour.
“As Treasurer of Australia, the public has a legitimate expectation that they will see the full benefits of rate cuts as announced by the RBA.”
Shadow treasurer Jim Chalmers meanwhile said both Westpac and ANZ’s choice was “disgraceful”.
“We can’t afford to have banks pocket some of this interest rate relief,” Mr Chambers told ABC News.
“They (customers) should certainly shop around to see whether they can get a better deal somewhere else.”
Governor Lowe provided a more balanced statement, but still is of the opinion this rate cut should be passed on in full.
“Yes, this reduction in the cash rate should be fully passed through to variable mortgage rates,” he said.
He also said a full pass-through from lenders “would mean the economy receives the full benefit of the RBA’s policy decision”.