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Following an emergency meeting held on Thursday (19 March), the Reserve Bank of Australia’s (RBA) board decided to cut the official cash rate to a new record low of 0.25 per cent, commence quantitative easing (QE), and launch a new $90 billion term funding facility for businesses.
The announcement was made two weeks ahead of its monthly board meeting – scheduled for 7 April – to counter the growing economic risks associated with the coronavirus (COVID-19) outbreak.
In response, the Commonwealth Bank of Australia (CBA) announced a raft of measures to provide relief to both home loan and business customers.
For home loan customers, CBA will:
- cut fixed rate home loan for one, two and three-year owner-occupied principal and interest (P&I) loans by 70 bps to 2.29 per cent – effective for both new and existing customers from 1 May; and
- automatically reduce repayments for all variable P&I home loan accounts to the minimum required within the borrower’s loan contract, effective from 1 May – borrowers will have the opportunity to opt out if they wish to retain their current principal repayment levels.
However, variable home loan rates remain unchanged.
For business customers, CBA will:
- reduce rates on business loans by 100 bps, in addition to the 25 bps reduction announced on 3 March, effective 3 April;
- participate in the RBA’s new term funding facility, aimed at providing low-cost credit to businesses; and
- continue to offer a range of measures to provide further assistance to customers facing financial hardship.
For depositors, CBA will:
- increase 12-month term deposit rates by 60 bps to 1.70 per cent for new and existing CBA personal customers, available from 19 March 2020 on balances from $5,000 to $2 million; and
- increase eligibility criteria for personal overdrafts, available online or through the CommBank App
Following the announcement, CBA CEO Matt Comyn said that “these are unprecedented times, and they call for unprecedented measures”.
“We recognise that this is a very concerning time for our customers and the community. We are focused on delivering the best possible service to all of our customers and supporting the Australian economy.
“Following [the]reduction in the official cash rate by 25bps we are taking deliberate steps to further support parts of the economy most in need. In particular, we want to ensure that we help keep small businesses open so that they can keep Australians employed, and that we do everything we can to support households and older Australians.”
He added: “We understand the ongoing uncertainty as the nation responds to the challenges posed by the coronavirus. Australia has a strong financial system and economy, and we stand ready to support our customers, our people, our suppliers and the economy at this time.”
[Related: RBA announces emergency cut]