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Three out of four big banks cut rates

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Mal Maiden: bank on more interest rate cuts

Business columnist Malcolm Maiden takes a look at the news in this week's business market.

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Westpac has joined the Commonwealth Bank and the National Australia Bank in reducing its standard variable rate by 0.20 percentage points, the third of the big banks to make a move following yesterday's Reserve Bank decision to cut the cash rate by 25 basis points.

Westpac's new standard variable rate, 6.51 per cent, will take effect on December 17. CBA's new standard variable rate - 6.4 per cent - would be effective from December 10, CBA said. NAB's new rate of 6.38 per cent would also be effective from the same day.

NAB cuts its standard mortgage rate to 6.38%.

NAB cuts its standard mortgage rate to 6.38%. Photo: Glenn Hunt

ANZ is sticking with its tradition to not announce its decision until the second Friday of each month, which will be December 14.

Mortgage holders have been waiting to find out if the big four banks would pass on the Reserve Bank's full rate cut, as the financial institutions' lobby group said they were delaying their decisions to remain competitive.

UBank, NAB's internet-based subsidiary, followed shortly after, cutting its home loan rate by 20 basis points to 5.27 per cent.

Financial services company Yellow Brick Road passed on the RBA's cut in full, lowering its new variable home loan rate to 5.25 per cent for the first year.

CBA, Australia's biggest mortgage lender, said it has continued to balance the needs of 1.8 million home loan borrowers with those of its 11 million depositors and its shareholders.

"A significant factor impacting this balancing of needs has been the increased competition in the domestic deposit market which has benefited many customers, including those who rely on interest earnings to meet their living expenses," the banks said in a statement.

NAB's group executive for personal banking, Lisa Gray, said in a statement that the bank wanted to strike the right balance between the cost of funding and offering competitive rates to customers. 

"NAB has offered the lowest standard variable home loan rate of the major banks for 41 months and our track record of being competitive speaks for itself," she said in a statement.

"The impact of deposit and wholesale funding costs remain high, resulting from instability in the global economy and low confidence domestically."

Yesterday, only two banks announced their response to the RBA's decision. The Bank of Queensland passed on 20 points and ING Direct passed on the full 25 points.

"They are sitting there at the moment desperately wishing their competitors show their hand first so they can undercut," Australian Bankers Association chief executive Steve Munchenberg told the ABC this morning.

He said the banks wanted to protect their market share and win new customers.

In October following the RBA's 0.25 point cut to the cash rate, the Commonwealth Bank, ANZ and National Australia Bank passed on 0.20 points while Westpac passed on 0.18 points.

Federal Treasurer Wayne Swan said he had one message for banks considering rate cuts.

"Do the right thing by your customers. The fact is, the NAB shouldn’t take their customers for a ride," Mr Swan said following NAB's announcement. He heaped praise on ING Direct for passing on the RBA's cut in full.

Standard variable rates

  • ANZ 6.60 per cent
  • Commonwealth 6.40 per cent*
  • NAB 6.38 per cent*
  • Westpac 6.51 per cent*

*NAB's reduced rate will be effective from December 10. It is currently 6.58 per cent. Commonwealth's reduced rate will be effective from December 10. It is currently 6.6 per cent. Westpac's current rate is at 6.71 per cent.

Cuts to the banks' standard variable rates since the RBA started its current easing cycle:

99 comments

  • Don't be surprised to hear the same old tired excuses for why the banks can't pass on the entire rate change to customers - their funding costs, their low return on capital, etc, etc.

    The funniet thing will be watching Wayne Swan getting agitated and doing nothing about it !

    Commenter
    ex-banker
    Location
    NSW
    Date and time
    December 05, 2012, 10:35AM
    • And what would you have him do? The Treasurer does not have coercive powers over either the RBA or private banks, nor should him. Swan is a highly respected and competant treasurer, but expecting him to enforce rate cuts is unrealistic.

      Commenter
      Phillip James
      Location
      South Melbourne
      Date and time
      December 05, 2012, 11:01AM
    • Wow. NAB are holding on to 5c out of every $100. What greed! How will these poor struggling mortgage holders ever survive?

      Commenter
      be responsible for your decisions
      Date and time
      December 05, 2012, 11:06AM
    • I share the same sentiment as comments below. We are with ING, no fees and a very competitive rate. Their service is also first class. Likewise, if I felt my bank wasn't competitive, I'd up and adam without hesitation. Forget loyalty. The only loyalty banks are concerned with are profit and KPI's so that management get their bonuses and excessive salaries. Ultimately, the power resides with the customer.

      Commenter
      Walked Already
      Location
      Western Suburbs
      Date and time
      December 05, 2012, 11:07AM
    • Course they don't pass it on in full - Westpac will be the same - Gail Harvey needs to protect her multi-million dollar bonuses.

      Commenter
      Tim of Altona
      Date and time
      December 05, 2012, 11:16AM
    • My bank is paying me an average of 6.7% for term deposits I have locked in for another 4 years.

      Commenter
      who me?
      Date and time
      December 05, 2012, 11:20AM
    • Of course Wayne won't do anything about it! For every $100M is interest income the banks receive, $30M goes to Wayne so he can balance his budget.

      Commenter
      Roo
      Date and time
      December 05, 2012, 11:24AM
    • The banks are businesses, not charitable institutions. Their responsibility is to maximise profits for their shareholders.
      If borrowers don't like this, they need go and find someone else to lend them money, instead of indulging in the great Aussie whinge

      Commenter
      mr micawber
      Location
      whinge land
      Date and time
      December 05, 2012, 11:33AM
    • @Phillip James, A highly respected and competent treasurer? Best laugh I've had all morning! Not sure who it is that respects him highly, it certainly isn't anybody actually working in the finance industry.

      Commenter
      Ben
      Location
      Newcastle
      Date and time
      December 05, 2012, 11:35AM
    • You are right Phillip (other than the bit about him being competent), but it is still funny watching Wayne threatening to hit the banks with a wet lettuce - frightening!

      Commenter
      Jim
      Location
      vermont
      Date and time
      December 05, 2012, 11:38AM

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