‘Know homeowners are hurting’: Banks announce major move after RBA cuts cash rate

The major banks have all announced they will pass on the Reserve Bank of Australia’s cash rate cut in full to variable home loan customers.

All big four banks have confirmed they will pass Tuesday’s rate cut on in full for customers on a variable rate home loan.

The Reserve Bank of Australia cut the cash rate on Tuesday by 25 basis points, to 3.85 per cent.

Within moments of the reserve bank’s decision, NAB announced it would pass on the cut in full, dropping its standard variable rate by 0.25 per cent.

NAB confirmed it would decrease its standard variable home loan interest rate by 0.25 per cent, effective from Friday, May 30, with the 10-day delay in line with previous changes to interest rates in the wake of a cash rate change.

NAB has become the first big four bank to announce changes to variable rate mortgages. Picture: Newswire

ANZ was quick to follow, also dropping its variable rate by 0.25 per cent, effective on May 30.

Westpac told customers it too would pass on the rate cut in full - to mortgage holders and savers.

From June 3, the bank will decrease its variable interest rates by 0.25 per cent for new and existing customers.

From May 30, variable rates on Westpac Life accounts will decrease by 0.25 per cent, while new customers applying online for a Westpac eSaver account will also cop a 0.25 per cent interest rate cut.

The Commonwealth Bank of Australia will also drop variable interest rates on home loans by 0.25 per cent.

CBA Executive Angus Sullivan said the decision would deliver “much needed additional relief” for homeowners.

“When combined with the February rate cut this change should free up some more cash flow for homeowners who need it,” he said.

“We know many have had tighter budgets in recent months and will welcome that additional flexibility.”

The Reserve Bank cut the cash rate for the second time this year on Tuesday. Picture: NCA NewsWire / Christian Gilles

May’s RBA move is the second rate cut this year, after previously slashing rates by 25 basis points in February from 4.35 to 4.10 per cent, before pausing in April.

Canstar director of data insights Sally Tindall said in this environment, the big four banks were always likely to pass on any rate cut in full.

“Often it comes down to the interest rate environment and the economic backdrop we are in to see if they pass on an interest rate reduction,” she said.

“In this environment I do not see a world where the banks don’t pass on a May cut ... the banks know better than anyone just how difficult it has been for some of their customers.”

The major banks don’t have to cut rates in line with the RBA. Picture: NewsWire / Nikki Short

While the banks have moved quickly on the first two interest rate cuts, households are being warned the major banks do not always pass on rate cuts in full should there be a flurry of rate reductions.

“Banks when they go and set their interest rates do not need to dance to the beat of the RBA drum and can set interest rates that are appropriate to their business,” Ms Tindall said.

“They look at a range of factors, one of which is the cash rate.

But they also look at wholesale funding, cost at the other end of the equation and paying out deposits and competition in the market.”

Originally published as ‘Know homeowners are hurting’: Banks announce major move after RBA cuts cash rate