Big four banks to pass on RBA rate cut to borrowers

The official cash rate has been slashed to its lowest level on record – just 0.5%. Banks typically use this rate as a guide to set interest rates on their products, such as home loans and savings accounts. How have the big four banks reacted to the cut?  
big four banks pass on July 2019 cash rate cut
Source: Vitalii Tairov, Canstar.

Today, the Reserve Bank of Australia (RBA) cut the official cash rate by 0.25 percentage points, the lowest rate on record. It’s the fourth cut to the rate since June last year, when it was reduced from 1.5% to 1.25%. That June cut was the first change since the central bank lowered it to 1.5% in August, 2016.

The Reserve Bank Of Australia's chart showing the official cash rate changes since 1990.
The official cash rate has been on the decline to historic lows since October, 2011. Source: RBA

Prior to today’s reduction, National Australia Bank (NAB) had the lowest rate on offer of the big four banks – NAB, ANZ, Westpac and Commonwealth Bank (CBA) – at 3.09% (comparison rate 3.09%). Since the RBA announced the cut, all four of the major Australian banks have cut their home loan interest rates.

Westpac was the first of the big four to cut the interest rates on some of its loans today, by the full 0.25%, issuing a statement just nine minutes after the RBA’s announcement. Commonwealth Bank was just a minute slower, tweeting 10 minutes after the RBA announcement that it would pass the entire cut onto some of its home loan customers, too.

NAB followed, also announcing via Twitter at 3.55pm AEDT, while ANZ issued a media statement confirming their reductions 4.30pm AEDT. Non-major lenders have also cut their rates. The lowest rate on Canstar’s database at time of publication is now 2.44%.

Westpac cuts to home loan rates:

Westpac’s cuts are effective from 17 March, 2020, and apply to variable interest rates for home loan customers, “as well as rates on small business cash-based loans and overdrafts”, the bank said in a statement.

“The reduction means an owner occupier customer with a standard variable home loan of $400,000 on principal and interest repayments will save an extra $60 per month, or $720 per year,” the statement said.

The rates are:

  • Owner-occupier principal and interest variable home loan: 4.58% (comparison rate to be advised)
  • Residential investment property principal and interest variable loan rate: 5.13% (comparison rate to be advised)
  • Owner-occupier interest-only variable home loan rate: 5.17% (comparison rate to be advised)
  • Residential investment property variable interest-only loan rate:  5.39%. (comparison rate to be advised)

Commonwealth Bank cuts to home loan rates:

CBA’s cuts mean its new rates will be the “lowest on record” for Australia’s largest bank, Angus Sullivan, Group Executive Retail Banking Services said in a statement.

The bank’s new standard variable rates, which come into effect on 24 March, are:

  • Owner-occupier principal and interest standard variable rate: 4.55% p.a. (comparison rate to be advised)
  • Investor principal and interest standard variable rate: 5.13%. (comparison rate to be advised)
  • Owner-occupier interest only standard variable rate: 5.04% p.a. (comparison rate to be advised)
  • Investor interest only standard variable rate: 5.39% (comparison rate to be advised)

National Australia Bank cuts to home loan rates:

NAB announced on twitter that it had reduced home loan, small business and business overdraft variable rates by 0.25 percentage points, effective 13 March.

The bank said, in a statement, that their “Tailored Home Loan” variable rates would be:

  • Owner-occupier principal and interest-only variable rate: 4.77% (comparison rate to be advised)
  • Investor principal and interest-only variable rate: 5.37% (comparison rate to be advised)
  • Owner-occupier interest-only variable rate: 5.34% (comparison rate to be advised)
  • Investor interest-only variable rate: 5.67% (comparison rate to be advised)

“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 Chief Customer Officer Consumer Banking Mike Baird said.


ANZ cuts to home loan rates:

ANZ – the last of the big four to budge – made variable rate cuts by between 0.25 and 0.35 percentage points to support customers and the broader economy through this period of uncertainty, the bank said in a statement today.

“Customers wanting to increase the money in their pocket each month can contact us to decrease their monthly minimum payments,” ANZ Group Executive Australia Retail & Commercial Mark Hand said.

The bank’s new standard variable rates, which come into effect on 13 March, are:

  • Owner occupier principal and interest variable rate: 4.54% (comparison rate to be advised by ANZ)
  • Investor principal and interest variable rate: 5.14% (comparison rate to be advised by ANZ)
  • Owner occupier interest-only variable rate: 5.09% (comparison rate to be advised by ANZ)
  • Investor interest-only variable rate: 5.39% (comparison rate to be advised by ANZ)

 

Lowest Variable Rates* from the Major Banks prior to RBA Board meeting, Tuesday, 3 March 2020
Bank Loan Rate Comparison Rate Monthly Repayment
NAB Base Variable Rate P&I Special Offer <80% 3.09% 3.09% $1,706
ANZ Simplicity Plus P&I <80% Special Offer 3.12% 3.16% $1,712
Westpac Flexi First Option P&I 95% Special Offer 3.28% 3.29% $1,747
Commonwealth Bank Extra P&I 95% 3.32% 3.33% $1,756
Whole of Market Average Variable Rate 3.74% $1,850
Source: Canstar.com.au – 03/03/2020. *Excludes loans with introductory periods or those exclusive to first home buyers. Based on variable rate home loans available to owner occupiers for the loan amount of $400,000 at 80% LVR with principal and interest repayments made over a total loan term of 30 years. Products in ascending order by interest rate. Comparison Rates based on a loan amount of $150,000 over 25 years. Major Banks include ANZ, Commonwealth Bank, NAB and Westpac.

Additional reporting: Ellie McLachlan

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