Yesterday afternoon (2 March), the Reserve Bank of Australia (RBA) lowered the official cash rate by 25 bps from 0.75 per cent to 0.5 per cent – marking the fourth cut since June 2019 when the easing cycle commenced.
This follows a sharp turnaround in sentiment ahead of the RBA’s monetary policy board meeting, with analysts initially expecting the central bank to keep rates on hold.
Developments in the domestic and global economy are likely to have altered the RBA’s tone, with weak local market indicators and the coronavirus (COVID-19) outbreak rattling market confidence.
Lenders, including all big four banks, have already begun repricing their offerings in response to the cut.
Westpac Group (includes subsidiaries Bank of Melbourne, BankSA, and St George Bank) was the first major bank to reprice its offerings, cutting rates by 25 bps for home loan customers, as well as rates on small business cash-based loans and overdrafts.
From Tuesday, 17 March 2020, Westpac will make the following changes:
- variable home loan (owner-occupier) rates will be reduced by 25 bps to 4.58 per cent for customers with principal and interest terms
- variable residential investment property loan rates will be reduced by 25 bps to 5.13 per cent for customers with principal and interest terms
- variable home loan (owner-occupier) rates will be reduced by 25 bps to 5.17 per cent for customers with interest-only terms
- variable residential investment property loan rates will be reduced by 25 bps to 5.39 per cent for customers with interest-only terms
- variable interest rates on small business cash-based loans and overdrafts will be cut by 25 bps
According to David Lindberg, Westpac’s chief executive, consumer, the bank’s decision to pass on the full 25 bps was designed to provide relief to customers amid growing concerns regarding the economic impact of the coronavirus outbreak.
“We recognise that COVID-19 will have a direct impact on our nation’s economy, and we want to provide additional support to our small business and home loan customers at this unprecedented time,” he said.
“This will give our variable home loan and small business customers more money in their back pocket through passing on the full 0.25 per cent p.a. interest rate reduction.
“Our home loan customers can also take advantage of our lowest variable home loan rates in 50 years to help purchase their next home or pay more off their mortgage faster.”
However, Mr Lindberg noted the impact of lower rates on the bank’s margins, adding that Westpac would carefully consider future pricing decisions in the event of further easing from the RBA.
“While this is the right decision, pricing changes are increasingly challenging as the cash rate heads towards zero. We will continue to review our rates on a case-by-case basis taking into account the diverse range of stakeholders and factors which influence the cost of funding,” he said.
The Commonwealth Bank of Australia (CBA) has also passed on the RBA’s cut in full, reducing variable rates by 25 bps.
Effective from 24 March, CBA will make the following changes:
- Owner-occupied P&I standard variable rate home loans will be reduced by 25 bps to 4.55 per cent
- Investor P&I standard variable rate home loans will be reduced by 25 bps to 5.13 per cent
- Owner-occupied interest-only standard variable rate home loans will be reduced by 25 bps to 5.04 per cent
- Investor interest-only standard variable home loans reduced by 25 bps to 5.39 per cent
Angus Sullivan, group executive, retail banking services commented: “In responding to this latest official interest rate cut we have examined the important role we play in supporting the Australian economy and the unique set of circumstances facing the country.”
“We also recognise the importance of managing the business sustainably for the long term and balancing the needs of borrowers and depositors. We will continue to review our pricing and make further adjustments as required.”
Mr Sullivan said the bank would be proactively informing customers of the rate cuts.
“We encourage customers to take advantage of these record low interest rates and contact us to reduce their minimum repayment, which will put extra money in their account each month,” he said.
NAB has announced reductions of 25 bps to rates across its variable home loan products, as well as its variable small business options loan and business overdraft facilities.
Effective from 13 March 2020, NAB’s advertised Tailored Home Loan variable rates will be as follows:
- Owner-occupied P&I rates have been cut to 4.52 per cent
- Investor P&I rates have been cut to 5.12 per cent
- Owner-occupied IO rates have been cut to 5.09 per cent
- Investor IO rates have been cut to 5.42 per cent
NAB chief customer officer, consumer banking Mike Baird commented: “In making these decisions we have had to consider the unprecedented challenges of the low interest-rate environment and impacts of the bushfires and coronavirus outbreak on our customers and the broader economy.
“NAB has a track record of seeing our customers through difficult economic conditions and we will continue to lend and support our customers.
“We understand that for our customers the extra money saved on their mortgages can be used in different ways.
“Some choose to pay down their loans faster while others are choosing to reduce monthly repayments to help with the household budget. Our role is to offer our customers choice.”
ANZ has responded to the RBA’s cut with mortgage rate reductions of between 25 bps and 35 bps.
Effective from 13 March, ANZ’s rates will be as follows:
- Owner-occupied P&I rates will decrease by 25 bps to 4.54 per cent
- Investor P&I rates will decrease by 25 bps to 5.14 per cent
- Owner-occupied IO rates will decrease by 25 bps to 5.09 per cent
- Investor IO rates will decrease by 35 bps to 5.39 per cent
ANZ Group executive, Australia retail and commercial Mark Hand said: “The decision by the Reserve Bank to reduce the cash rate to historically low levels highlights the significant impact the outbreak of COVID-19 is already having on the global economy.”
“While there were a range of factors considered in making this decision, ANZ is prepared to play its role in supporting both our customers and the broader economy through this period of uncertainty.”
Athena Home Loans
Athena Home Loans has also lowered its mortgage rates by the full 25 bps, effective immediately.
Athena’s variable owner-occupied P&I rates now start from 2.59 per cent.
Nathan Walsh, co-founder and CEO of Athena Home Loans, said: “For the fourth time in a row, Athena has immediately passed on the full RBA rate cut to all customers.”
“None of the 12 largest home loan lenders have done this. This is money that should be in the pockets of Aussie families.”
Mr Walsh encouraged borrowers to “drop their bank” if their lender does not pass on the rate cut in full.
“The savings opportunity is too important to be short-changed,” he added.
“Customers who have been with Athena since the June rate cut have now received the entire 1 per cent off their rate.”
Michael Starkey, co-founder of Athena Home Loans, added: “Australians should expect their lender to give them what is theirs to have. All too often the rate cuts are kept by lenders or are given to new customers while loyal customers miss out.”
“This is one reason why less than one in five Australians [trusts] that their lender always acts in their best interests. So, Athena’s message to Australians is not to wait for their lender to start operating with fairness. Instead, to change to one that will.
“We challenge the industry to do as we have done and immediately pass on the rate cut so customers – new and existing – so they can experience the full benefits of the cut.
Neobank 86 400 passed on the full rate cut for new and existing customers, effective immediately (from Wednesday, 4 March).
86 400’s variable rate for owner-occupiers paying principal and interest now starts from 2.84 per cent.
Robert Bell, 86 400 CEO, said: “After launching our home loan products late last year, this has been our first opportunity to address a rate cut.”
“As an agile bank, we can make the obvious and simple decisions quicker to put money back in our customers’ pockets.
“Passing on the full rate cut today underscores our commitment to helping Australians take control of their money. Whether that’s in saving for a home, simplifying and speeding up the mortgage process or paying their loan off faster through a better rate.”
Reduce Home Loans
Owner-occupied and investment home loan customers at Reduce will receive the full cut, with rates now starting from 2.44 per cent for owner-occupiers and 2.79 per cent for investors.
Reduce Home Loans general manager Josh Beitz, commented: “Australian families deserve a better deal, not gimmicks, just the best low rate possible.
“At Reduce we are continuing our mission to always deliver market-leading rates by immediately slashing our flagship program to remain the cheapest in the market, proving our commitment to the Australian public yet again.”
Homestar Finance has reduced rates by 25 bps for new and existing customers, effective immediately.
The lender’s rates now start from 2.53 per cent.
The lender has cut rates by 25 bps, with its home loans now starting from 2.52 per cent.
More to come
[Related: Cash rate falls to new record low]
Charbel Kadib is the news editor on the mortgages titles at Momentum Media.
Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.