How did the big four respond to the October RBA rate cut?

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on October 02, 2019
How did the big four respond to the October RBA rate cut?

Photo by Steven Su on Unsplash

Australia’s big four banks have now all announced cuts to their interest rates, following the RBA’s decision to drop the cash rate to a historic low of 0.75%.

However, none of the big four will pass on the 25 basis point cut in full.

CommBank first slashed rates on Tuesday night, quickly followed by NAB. Westpac and ANZ followed suit on Wednesday afternoon.

Treasurer Josh Frydenberg said the big four’s decision not to pass on the cut in full was disappointing.

“The Reserve Bank itself has pointed to the lower borrowing costs for the banks and their expectation that these interest rate cuts are passed on,” Mr Frydenberg told Today.

“It’s not just the Government that they are going against here, they are also going against the advice of the Reserve Bank.

“The banks have a lot of explaining to do. People should shop around, get the best deal and make their displeasure known to their banks.”

RBA Governor Philip Lowe said in an address at the RBA board dinner that the cuts were aimed at achieving economic targets which had slowed in recent months.

“We are seeking to make more assured progress towards both full employment and the inflation target,” Mr Lowe said.

“Today’s decision, together with our decisions in June and July, will assist on each of these fronts.

“In doing so, these decisions will promote the collective economic welfare of the Australian people, which we need to remember is the ultimate goal of monetary policy.”

Here’s what each of the big four banks cut rates by and their justification for doing so.

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Commonwealth Bank rate cut

Commonwealth Bank was the first of the big four to announce reductions to interest rates and announced they would be cutting their standard variable rates for home loan customers by 13 to 25 basis points.

Variable-rate changes will be effective from 22 October 2019 while new fixed-rates will be available from 3 October 2019.

CommBank will also reduce the base rate of its Netbank Saver account by 0.05% p.a., taking the rate from 0.15% p.a. to 0.10% p.a., effective from 4 October 2019.

According to Commonwealth Bank: 

  • Owner Occupied P&I Standard Variable Rate home loans will be reduced by 0.13% p.a to 4.80% p.a.
  • Investor P&I Standard Variable Rate home loans will be reduced by 0.13% p.a. to 5.38% p.a.
  • Owner Occupied I&O Standard Variable Rate home loans will be reduced by 0.13% p.a. to 5.29% p.a.
  • Investor IO Standard Variable Rate home loans will be reduced by 0.25% p.a. to 5.64% p.a.
  • Two and three-year Owner Occupied P&I Fixed Rates in the Wealth Package will be reduced to 2.99% p.a.

What they said:

Angus Sullivan, Group Executive Retail Banking Services said the bank was attempting the difficult task of balancing the needs of all stakeholders.

“Today’s announcement means our SVR for Owner Occupied customers, with Principal and Interest repayments, will be at record low levels,” Mr Sullivan said.

“As the Reserve Bank cash rate has reached record lows, we face a difficult balancing act between the multiple, valid interests of our stakeholders.

“Particularly given it is currently not feasible to pass on the full rate reduction to more than $160 billion of our deposits which are at, or near, zero rates.

“In balancing these interests, we have carefully considered how to best meet the needs of over 6 million savings customers – who may find it challenging to make ends meet with record low savings interest rates – with the needs of our 1.6 million home loan customers, who want to pay less on their mortgages; and the needs of our shareholders, many of whom are retirees who rely on our dividend.

“In this environment, while reducing the SVR for home loan customers by between 0.13% p.a. and 0.25% p.a., we have also decided to limit the base rate reduction for savings customers in our popular NetBank Saver product to 0.05%.

“These changes are in addition to the fee removals, fee reductions and pre-emptive fee alerts we have already introduced, which have helped save our customers over $415 million.

“We are also announcing a new 2.99% p.a. 2 and 3-year Owner Occupied Principal and Interest Fixed Rate, available to new and existing Wealth Package customers taking out a Fixed Rate loan.

“This allows customers who prefer certainty to lock-in this historically low rate. This means we have reduced our 2 and 3 year Fixed Rates by 0.80% p.a. since July for Owner Occupied Principal and Interest customers. ”

Lender

Variable
More details
UNLIMITED REDRAWSSPECIAL OFFER
  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
UNLIMITED REDRAWSSPECIAL OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
Variable
More details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES
  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
Variable
More details
ZERO APPLICATION FEESFEE FREE OFFSET
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
  • No upfront or ongoing fees
ZERO APPLICATION FEESFEE FREE OFFSET

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
  • No upfront or ongoing fees
Variable
More details
AN EASY DIGITAL APPLICATION
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
AN EASY DIGITAL APPLICATION

Neat Variable Home Loan (Principal and Interest) (LVR < 60%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
NO APPLICATION FEES
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
NO APPLICATION FEES

Yard Home Loan (Principal and Interest) (Special) (LVR < 80%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
NO UPFRONT OR ONGOING FEES
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
NO UPFRONT OR ONGOING FEES

Owner Occupier Accelerates - Evaporate (LVR 60%-70%) (Principal and Interest)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
NO UPFRONT OR ONGOING FEES
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
NO UPFRONT OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 80%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
UNLIMITED EXTRA REPAYMENTS
UNLIMITED EXTRA REPAYMENTS

Basic Home Loan (Principal and Interest) (LVR < 60%)

    Variable
    More details
    EASY DIGITAL APPLICATION
    EASY DIGITAL APPLICATION

    Neat Variable Home Loan (Principal and Interest) (LVR 70%-80%)

      Variable
      More details
      $0 APPLICATION FEE
      $0 APPLICATION FEE

      Budget Home Loan (Principal and Interest) (LVR < 80%)

        Variable
        More details
        100% FULL OFFSET ACCOUNT
        100% FULL OFFSET ACCOUNT

        Offset Package Home Loan (Principal and Interest) (LVR < 60%)

          Variable
          More details
          LIMITED TIME OFFER
          • Fast turnaround times, can meet 30-day settlement
          • No ongoing or monthly fees, add offset for 0.10%
          • Extra repayments + redraw services
          LIMITED TIME OFFER

          Smart Booster Home Loan Discounted Variable - 1yr

          • Fast turnaround times, can meet 30-day settlement
          • No ongoing or monthly fees, add offset for 0.10%
          • Extra repayments + redraw services

          Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of May 29, 2022. View disclaimer.

          NAB rate cut

          National Australia Bank swiftly followed Commbank and announced they would decrease variable interest home loan rates by 15 basis points.

          The changes will be effective from 11 October 2019.

          According to NAB:

          • Variable owner-occupier Principal and Interest (P&I) loans will be reduced by 0.15% p.a. from 4.92% p.a. to 4.77% p.a.
          • Variable investor P&I loans will be reduced by 0.15% p.a. from 5.52% p.a. to 5.37% p.a.
          • Variable owner-occupier Interest only (IO) loans will be reduced by 0.15% p.a. from 5.49% p.a. to 5.34% p.a.
          • Variable investor IO loans will be reduced by 0.15% p.a. from 5.97% p.a. to 5.67% p.a.

          What they said:

          NAB Chief Customer Officer Consumer Banking, Mike Baird said the 15-basis point cut could save owner-occupier customers paying principal and interest on a $400,000 home loan $444 a year.

          “This is on top of the 44-basis point reduction across June and July this year, which means customers with an average $400,000 loan could save a total of $1,740 a year,” Mr Baird said.

          “We acknowledge our housing investors paying interest-only have some of the highest rates, which is why we have decided to cut their rate by 30-basis points.

          “While these changes further support our 930,000 home loan customers, we are aware of the growing impact reductions in interest rates have on our 3 million savings and investment customers and will continue to offer competitive interest rates on savings and term deposits.

          “At the same time, we are committed to investing in and improving our customer experience, and since May have scrapped around 100 fees from our products and services.”

          Lender

          Variable
          More details
          UNLIMITED REDRAWSSPECIAL OFFER
          • Fast turnaround times, can meet 30-day settlement
          • For purchase and refinance, min 20% deposit
          • No ongoing or monthly fees, add offset for 0.10%
          UNLIMITED REDRAWSSPECIAL OFFER

          Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

          • Fast turnaround times, can meet 30-day settlement
          • For purchase and refinance, min 20% deposit
          • No ongoing or monthly fees, add offset for 0.10%
          Variable
          More details
          100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES
          • No upfront or ongoing fees
          • 100% full offset account
          • Extra repayments + redraw services
          100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

          Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

          • No upfront or ongoing fees
          • 100% full offset account
          • Extra repayments + redraw services
          Variable
          More details
          ZERO APPLICATION FEESFEE FREE OFFSET
          • We lower your rate based off how much you’ve paid down your loan
          • Automatic rate match
          • No upfront or ongoing fees
          ZERO APPLICATION FEESFEE FREE OFFSET

          Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

          • We lower your rate based off how much you’ve paid down your loan
          • Automatic rate match
          • No upfront or ongoing fees
          Variable
          More details
          AN EASY DIGITAL APPLICATION
          • No ongoing fees - None!
          • Unlimited additional repayments
          • Easy online application, find out if you're approved quick!
          • Redraw- Access your additional payments if you need them
          • Use the app to get loan insights to help you pay off your home loan faster
          AN EASY DIGITAL APPLICATION

          Neat Variable Home Loan (Principal and Interest) (LVR < 60%)

          • No ongoing fees - None!
          • Unlimited additional repayments
          • Easy online application, find out if you're approved quick!
          • Redraw- Access your additional payments if you need them
          • Use the app to get loan insights to help you pay off your home loan faster
          Variable
          More details
          NO APPLICATION FEES
          • No ongoing fees - None!
          • Unlimited additional repayments
          • Easy online application, find out if you're approved quick!
          • Redraw- Access your additional payments if you need them
          • Use the app to get loan insights to help you pay off your home loan faster
          NO APPLICATION FEES

          Yard Home Loan (Principal and Interest) (Special) (LVR < 80%)

          • No ongoing fees - None!
          • Unlimited additional repayments
          • Easy online application, find out if you're approved quick!
          • Redraw- Access your additional payments if you need them
          • Use the app to get loan insights to help you pay off your home loan faster
          Variable
          More details
          NO UPFRONT OR ONGOING FEES
          • No ongoing fees - None!
          • Unlimited additional repayments
          • Easy online application, find out if you're approved quick!
          • Redraw- Access your additional payments if you need them
          • Use the app to get loan insights to help you pay off your home loan faster
          NO UPFRONT OR ONGOING FEES

          Owner Occupier Accelerates - Evaporate (LVR 60%-70%) (Principal and Interest)

          • No ongoing fees - None!
          • Unlimited additional repayments
          • Easy online application, find out if you're approved quick!
          • Redraw- Access your additional payments if you need them
          • Use the app to get loan insights to help you pay off your home loan faster
          Variable
          More details
          NO UPFRONT OR ONGOING FEES
          • No ongoing fees - None!
          • Unlimited additional repayments
          • Easy online application, find out if you're approved quick!
          • Redraw- Access your additional payments if you need them
          • Use the app to get loan insights to help you pay off your home loan faster
          NO UPFRONT OR ONGOING FEES

          Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 80%)

          • No ongoing fees - None!
          • Unlimited additional repayments
          • Easy online application, find out if you're approved quick!
          • Redraw- Access your additional payments if you need them
          • Use the app to get loan insights to help you pay off your home loan faster
          Variable
          More details
          UNLIMITED EXTRA REPAYMENTS
          UNLIMITED EXTRA REPAYMENTS

          Basic Home Loan (Principal and Interest) (LVR < 60%)

            Variable
            More details
            EASY DIGITAL APPLICATION
            EASY DIGITAL APPLICATION

            Neat Variable Home Loan (Principal and Interest) (LVR 70%-80%)

              Variable
              More details
              $0 APPLICATION FEE
              $0 APPLICATION FEE

              Budget Home Loan (Principal and Interest) (LVR < 80%)

                Variable
                More details
                100% FULL OFFSET ACCOUNT
                100% FULL OFFSET ACCOUNT

                Offset Package Home Loan (Principal and Interest) (LVR < 60%)

                  Variable
                  More details
                  LIMITED TIME OFFER
                  • Fast turnaround times, can meet 30-day settlement
                  • No ongoing or monthly fees, add offset for 0.10%
                  • Extra repayments + redraw services
                  LIMITED TIME OFFER

                  Smart Booster Home Loan Discounted Variable - 1yr

                  • Fast turnaround times, can meet 30-day settlement
                  • No ongoing or monthly fees, add offset for 0.10%
                  • Extra repayments + redraw services

                  Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of May 29, 2022. View disclaimer.

                  Westpac rate cut

                  Westpac announced it will be cutting variable home loan rates by 15 basis points, effective from 16 October 2019.

                  According to Westpac: 

                  • Variable home loan (owner occupier) rates will be reduced by 0.15% p.a. to 4.83% p.a. for customers with P&I repayments.
                  • Variable residential investment property loan rates will be reduced by 0.15% p.a. to 5.38% p.a. for customers with P&I repayments.
                  • Variable home loan (owner occupier) rates will be reduced by 0.15% p.a. to 5.42% p.a. for customers with IO repayments.
                  • Variable residential investment property loan rates will be reduced by 0.15% p.a. to 5.64% p.a. for customers with IO repayments.

                  What they said:

                  David Lindberg, Westpac Chief Executive, Consumer Division, said factors like commercial pressures and providing support to Australian families were all factors in the decision.

                  “Westpac will be decreasing interest rates by 15 basis points for variable home loan customers, bringing our Standard Variable Rate (SVR) to the lowest we have on record for owner-occupiers with principal and interest repayments,” Mr Lindberg said.

                  “For an owner-occupier customer with a standard variable home loan of $400,000 on principal and interest repayments, this reduction could result in a saving of $36 per month, or $432 each year.

                  “Providing the support and finance to help Australians into their homes is a core part of our business strategy. Today’s announcement will assist customers wanting to get ahead on home loan repayments, as well as new home buyers looking to purchase a property.”

                  ANZ rate cut

                  ANZ was the last of the big four to cut its interest rates and announced it would decrease all of its variable interest home loan rates by 14 to 25 basis points.

                  The variable rate changes will be effective from 11 October 2019, while fixed changes will be effective from 3 October 2019.

                  According to ANZ:

                  • For Standard Variable Rate Owner Occupiers paying P&I the Index Rate will reduce by 0.14% p.a. to 4.79% p.a.
                  • For Standard Variable Rate Investors paying I&O the Index Rate will reduce by 0.25% p.a. to 5.74% p.a.
                  • 2 & 3 year fixed rates for Owner Occupiers paying P&I will be reduced to 2.98% p.a. (with ANZ Breakfree Package)
                  • 2 & 3 year fixed rates for Investors paying I&O to 3.49% p.a. (with ANZ Breakfree Package)

                  What they said:

                  ANZ Group Executive Australia Retail & Commercial, Mark Hand said the decision was based on balancing customer and business needs.

                  “This was a considered decision balancing the needs of our customers in a low rate environment as well as the performance of our business and our role in stimulating the economy,” Mr Hand said.

                  “We were able to match the full rate reduction in July and the majority in June, however, the dynamics of record-low interest rates has resulted in a reduction in variable home lending rates of between 0.14% p.a. and 0.25% p.a. this time around.

                  “While we recognise many customers will use this as an opportunity to pay down their existing home loans faster, we hope this provides the economic stimulus the Reserve Bank is wanting to generate.

                  “We have also announced a new fixed rate of 2.98% p.a. for homeowners paying principal and interest with either two or three-year terms available from tomorrow. This is the lowest residential rate on record for ANZ.”


                  Disclaimers

                  The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

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                  author-avatar
                  Alex joined Savings.com.au as a finance journalist in 2019. He enjoys covering in-depth economical releases and breaking down how they might affect the everyday punter. He is passionate about providing Australians with the information and tools needed to make them financially stable for their futures.

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