Major banks Westpac, NAB, Commonwealth and ANZ react to RBA’s record rate cut

The major lenders responded immediately after Australia’s central bank slashed the official interest rate to a new record low.

Westpac immediately followed the Reserve Bank of Australia’s historic decision to cut interest rates to a new record low, passing on the 25 basis point cut in full to its home loan customers.

Within minutes, this was followed by rival Commonwealth Bank whose customers will also see the entirety of this afternoon’s cut passed on to their mortgage repayments, followed soon after by NAB.

ANZ was the last of the big four banks to announce it would pass on the cut, announcing it would cut its variable rates by 0.25 per cent to 0.35 per cent. Smaller lenders Macquarie, NEO Bank and Athena Home Loans also passed on the cut in full.

We’re decreasing variable interest rates by 0.25% per annum for home loan customers, as well as small business cash-based loans and overdrafts. These changes will take effect on 17 March 2020.

— Westpac Bank (@Westpac) March 3, 2020

Following the RBA’s cash rate decision we have reduced the variable rates for our home loan customers by 0.25% p.a.

— CBA Newsroom (@CBAnewsroom) March 3, 2020

The major lenders were widely expected to hold on to the savings given the dramatically reduced profit margins on home loans.

“The banks are now walking a very fine line and with savings rates already down around 0.10 per cent, they have very little room to move,” comparison site Canstar’s finance expert Steve Mickenbecker said.

“A 0.25 per cent interest rate reduction to the average $400,000 home loan over 30 years could mean monthly principal and interest repayments falling by $56 to $1,794, and an interest saving of $20,249 over the life of the loan.”

The reduction will come into effect for NAB and ANZ customers on March 13, Westpac on March 17, while Commonwealth Bank borrowers will need to wait until March 24.

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Westpac consumer chief executive David Lindberg said the reduction in costs for the lender’s home loan customers will allow hundreds of dollars to be saved each year.

“We recognised 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.

The Commonwealth Bank retail boss Angus Sullivan said the major bank identified the role lenders play in supporting the Australian economy and the “unique set of circumstances facing the country”.

CBA home loan customers will also have their rates cut. Picture: Hollie Adams/The Australian

“We also recognise the importance of managing the business sustainably for the long term and balancing the needs of borrowers and depositors,” he said in a statement.

“We will continue to review our pricing and make further adjustments as required.”

ANZ group executive Mark hand said the RBA’s decision to reduce the rate “highlights the significance impact the outbreak of COVID-19 is already having on the global economy”.

He said ANZ was “prepared to play its role in supporting both our customers and the broader economy through this period of uncertainty”.

The RBA governor Philip Lowe made the drastic decision to cut the official cash rate to a record level after the deadly coronavirus wiped trillions of dollars off global share markets.

“The coronavirus has clouded the near-term outlook for the global economy and means that global growth in the first half of 2020 will be lower than earlier expected,” he said in his statement.

“It is too early to tell how persistent the effects of the coronavirus will be and at what point the global economy will return to an improving path.”

Reserve Bank of Australia Governor Philip Lowe says the deadly virus is weighing on the global economy. Picture: AAP Image/Mick Tsikas

The first deaths from the coronavirus were reported in both Australia and the US over the weekend, while Italy, Iran and South Korea revealed a spike in cases.

The escalation led to several countries expanding travel restrictions, further crippling economic activity and trading channels and compounding the fiscal pressure from the summer’s devastating bushfires and ongoing drought.

“This was a sensible call,” Deloitte Access Economics partner Chris Richardson told news.com.au of the central bank’s decision.

“The Australian economy has been in the slow lane, and a summer of bushfires followed by coronavirus has weighed on confidence.

“It’s important that the central bank weighs in to remind Australia that we have firepower as well as strong fundamentals.”

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Originally published as Major banks Westpac, NAB, Commonwealth and ANZ react to RBA’s record rate cut