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Westpac fails to pass on full RBA cut

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Westpac announces mortgage rate cuts

Westpac becomes the third of the big four banks to lower its mortgage rates, Chris Zappone reports.

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Westpac has cut its standard variable home loan rate by 37 basis points to 7.09 per cent, deciding not to pass on the full half percentage point by the RBA.

Its variable rate on business loans has been cut by 50 basis points.

Westpac group executive retail and business banking Jason Yetton downplayed the influence of the RBA's rate cut in the bank making the decision.

“It is now widely acknowledged that the link between the RBA’s cash rate and the actual cost of money to banks – in effect our own borrowing costs – plays an increasingly small role," he said. "Other ones, such as the relatively high cost of deposits and wholesale funding, have assumed critical importance,” said Mr Yetton.

“In particular, the price of deposits including term deposits has a major impact on our decision making."

More banks cut

Westpac is the third of the four major banks to announce their mortgage rate cuts after the Reserve Bank surprised the households by slashing 50 basis point from the cash rate on Tuesday.

Bendigo and Adelaide Bank this afternoon also unveiled plans to keep back some of the RBA's cut. The bank will cut its standard variable home loan 35 basis points to 7.10 per cent - but not until May 21.

A short time later, Bank of Melbourne moved to tackle National Australia Bank claim of being the lowest cost of the major banks matching the rival lender’s mortgage rate.

Bank of Melbourne cut its variable mortgage 41 basis point to 6.99 per cent.

Westpac owned St George Bank this evening announced it will reduce its standard variable home loan rate by 38 basis points to 7.04 per cent, effective May 14.

ANZ last to go

Customers of ANZ have to wait until next Friday to learn where the cost on its standard variable rate mortgage is headed, in keeping with ANZ's controversial independent pricing strategy.

Commonwealth Bank dropped its standard variable rate by 40 basis points to 7.01 per cent yesterday. On Wednesday, National Australia Bank lowered their mortgage rate by 32 basis points to 6.99 per cent.

The suspense around the big four's mortgage rate pricing has been blamed for adding to the uncertainty of consumers, who have in turn curtailed spending and borrowing.

The RBA cut official rates to 3.75 per cent from 4.25 per cent this week after the economy showed continued weakness and its preferred inflation gauge sank to its lowest since 2000.

163 comments

  • Predictable in the current environment. Just shows how little influence Swan has over the banks.

    Commenter
    peter
    Location
    sydney
    Date and time
    May 04, 2012, 1:51PM
    • Swannie has just got to mention the word "regulation".

      Commenter
      Gazza
      Date and time
      May 04, 2012, 2:06PM
    • You got it wrong. Swan has been supporting the banks all the way. It was Swan who allowed Aussie, Wizard and other brokers to be gobbled up by the banks. It was Swan who allowed Westpac to snap up St. George Bank, which was the biggest of the non big four banks at the time.

      All of Swan's bleatings now are for show. he is the one who engineered this dismal state of affiars.

      Commenter
      Jill
      Location
      Wyong
      Date and time
      May 04, 2012, 2:14PM
    • The World's Best Treasury Wayne Swan is irrelevant as we all know by now. Make redundant his position now and the federal budget deficit will reduce by some $350K - less cut to funding to more critical areas of the economy in the Federal Budget next week.

      For those who might be sympathetic to the World's Best Treasurer who position is made redundant, don't be as Wayne will be offered a senior executive position by his best buddy, Cameron of NAB, and will drawing an even higher pay.

      Commenter
      Sky
      Location
      Melb
      Date and time
      May 04, 2012, 2:18PM
    • Swan's job badly needs to be offshored.
      The uselessness will be the same and at least the cost will be a LOT less!

      Commenter
      Noons
      Location
      Sydney
      Date and time
      May 04, 2012, 2:26PM
    • Folks, it is called deregulation and democracy. Don't blame Swan, focus on who deregulated the financial sector and banks to this degree...

      Oh, silence?? So who was that? Swan? No? Then who?? Halllooo? Is anybody there?

      Yes it is gouging and it is not illegal, sad but not illegal.Would you advocate the treasurer compromise democracy and our legal system to somehow change this today?

      Commenter
      Hammel
      Location
      Melb
      Date and time
      May 04, 2012, 2:30PM
    • Keating perhaps?

      Commenter
      SilverTail
      Location
      UpperNorthShore
      Date and time
      May 04, 2012, 3:16PM
    • Yes it was Keating who did this and it was a fine move in response from a desire from the Australian public for a change. Howard didn't rescind this deregulation and the Libs are supposed to be about deregulation so don't expect any different from them against what Labor has done on this score. I'm not sure why Swan is saying what he does about the banks as the Libs are generally silent on this issue as they are even more in favour of less regulation which would only further exacerbate the yawning chasm between their rates and those of the RBA.

      Commenter
      Bennopia
      Location
      West Footscray
      Date and time
      May 04, 2012, 3:45PM
    • Hammel is partly correct. Rather it is a market economy, and in an international world, it is hard to escape from it. Australia doesn't have enough savings to cover debt, so all loans are exposed to international pressures. What's more, it puts savers in the box seat and they are demanding higher rates for their savings. So with both international lenders (to the banks) and local lenders to the banks (ie savers/depositors) demanding higher rates, and the banks needing to maintain margins, rates are not linked to the RBA cash rate.

      When the RBA cash rate is a good approximation to wholesale and deposit rates, then morgage rates track it. At the moment it is not a good approximation.

      Until there is an excess of credit (depositors or international lenders), the rates are going to remain tight.

      Commenter
      Paul T
      Date and time
      May 04, 2012, 4:46PM
  • I guess this shows Swan's ompotence as treasurer.

    Commenter
    mai
    Location
    sydney
    Date and time
    May 04, 2012, 1:52PM

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