CBA first bank to cut mortgage rates

CBA was the first major bank to cut its variable home loan interest rates, after the central bank eased official rates.

CBA first bank to cut mortgage rates

COMMONWEALTH Bank of Australia (CBA) has become the first major bank to cut its variable home loan interest rates, after the central bank eased official rates.

CBA has lowered its variable home loan interest rates by 58 basis points.

The move comes after the Reserve Bank of Australia's (RBA) decision today to cut the cash rate by a larger than expected 75 basis points to 5.25 per cent.

Financial markets were widely expecting a 50 basis point cut to 5.5 per cent.

The bank's complete home loan variable rate will fall to 7.74 per cent, from 8.32 per cent, while its economiser base variable rate will fall to 7.23 per cent, from 7.81 per cent.

The rates are effective from November 10.

The bank had previously cut its home loan interest rate by 0.21 basis points on October 30.

Retail Banking Services Group executive Ross McEwan said the bank understood the pressures that interest rates had on customers.

"Unfortunately, as a result of a significant increase in all three elements of our cost of funding over recent weeks, we have not been able to pass on the full amount of this latest decrease in interest rates,'' he said.

"Raising long-term funds remains extremely difficult and expensive.

"Similarly, the cost of short-term onshore funding has increased in recent weeks, and we are also experiencing increased costs in retail deposits.''

Mr McEwan said although the bank was not reducing its variable home loan rates by as much as the RBA, it expected global financial markets to normalise over time.

Once that happened, the Bank would be able to reduce rates by more than the RBA adjustments.

"Our customers can continue to expect additional out-of-cycle interest rate reductions,'' Mr McEwan said.