Commonwealth Bank first big bank to pass on full rate cut

TWO of the Big Four banks have passed on the full interest rate cut, and then some, from yesterday. How long until the others follow?

TWO of the Big Four banks have acted to pass on interest rate cuts after the Reserve Bank yesterday lowered the official cash rate to a historic low of 2.25 per cent.

This morning, Commonwealth Bank was the first to move when it announced it will pass on the full 25 basis points cut on its standard variable rate as well as its three-year fixed rate mortgages. It has also cut 30 basis points off its five-year fixed rate mortgage.

Australia’s largest bank’s standard variable rate is now 5.65 per cent while its three-year and five-year fixed rate home loans stand at 4.69 per cent.

The changes will take effect from February 20.

Westpac soon followed, announcing it will drop its standard variable rate by 28 basis points. Westpac previously had the highest standard variable rate of the Big Four.

The pressure is now on for the other two big banks, ANZ and NAB, to pass on the full rate to its customers. ANZ said it will announce a decision by Friday.

Smaller banks Bank of Queensland, ING Direct and ME Bank all passed on the full 25 basis points yesterday following the RBA’s move.

Treasurer Joe Hockey has demanded banks pass on the interest rate cut immediately to mortgage holders, credit card customers and those with small business loans.

He told ABC radio: “The flowthrough to the Australian economy is significant, and importantly, it must be immediate. I say again to the Australian banks to pass it on now.”

There were questions as to whether lenders would pass on the full interest rate cut, according to The Australian. Some analysts believed lenders may try to hold onto some of the savings because of new capital rules.

However, competition in the sector has been hot, especially as home prices in metro areas continue to grow, and CBA’s and Westpac’s moves to pass on the full rate cut will apply extra pressure on others to do the same.

Originally published as Commonwealth Bank first big bank to pass on full rate cut