ANZ and NAB drop rates as banks offer $8b lifeline to deal with coronavirus outbreak
Banks have slashed interest rates and will freeze small business loan repayments for up to six months amid the coronavirus pandemic, in a move worth millions of dollars to operators.
Economy
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Banks will freeze small business customers’ loan repayments for up to six months in response to the cashflow crunch caused by the coronavirus crisis.
The package, announced in Sydney this morning, applies to $100 billion of existing borrowing.
Australian Banking Association boss Anna Bligh said the move could put $8 billion back in the pockets of small business.
“This is a multibillion-dollar shot in the arm for small businesses when they need it the most,” Ms Bligh said.
Fast –tracked processes were being put in place and the deferrals could be available as soon as Monday.
“Businesses, I know, are doing it very tough,” she said. “They can rest assured that banks have got their back.”
Mortgage customers will also be supported, she said. Currently that need was not as pressing, but the situation was evolving.
Treasurer Josh Frydenberg told News Corp Australia the freeze was “unprecedented and a game changer”.
“Many small businesses use their home as collateral and these payments will also be deferred,” Mr Frydenberg said after the announcement.
The government was preparing more economic support, he said.
This is expected to include increasing the jobless payment.
Meanwhile, NAB will cut two per cent from new business loan rates and overdrafts on its main QuickBiz product.
It will also reduce variable rates on existing small business loans by 100 basis points.
Rates on new fixed home loans will become 0.6 per cent cheaper.
But there are no changes to home loan variable rates.
Depositors are being offered a 10-month term of 1.75 per cent.
NAB also said home loan customers “experiencing financial challenges” would also be able to pause repayments for up to six months.
NAB CEO Ross McEwan said: “These measures will provide significant relief to businesses and home buyers”.
ANZ mortgage customers will see variable interest home loan rates dropped by 0.15 per cent.
The bank will also introduce a two-year fixed rate of 2.19 per cent for owner occupiers paying principal and interest.
Customers will also be able to request a deferral of home loan repayments for up to six months.
Variable interest small business loan rates will drop 0.25 per cent, and all customers will be able to request a six-month payment deferral.
New two and three-year fixed rate small business loans will fall 0.8 per cent.
Yesterday, Commonwealth Bank has cut its fixed-rate home loans to record-low levels following the Reserve Bank of Australia’s emergency stimulus measures. CBA cut its one-, two- and three-year fixed home loan rates by 70 basis points to 2.29 per cent, while making no changes to its standard variable rate home loans.
The changes will save the average customer $400 a month and release up to $3.6 billion in cash for Australian households, CBA said.
“These are unprecedented times, and they call for unprecedented measures,” Commonwealth Bank chief executive Matt Comyn said.
It comes after the nation’s central bank has slashed the cash rate in a historic out-of-cycle cash move to a record low of 0.25 per cent.
Reserve Bank of Australia governor has reduced the cash rate today by 0.25 percentage points – this comes just 16 days after the latest rate cut.
Usually these decisions are made on the first Tuesday of each month but the unusual move has come amid the coronavirus pandemic sweeping the globe.
Shortly after the RBA’s decision the Morrison Government announced an investment of up to $15 billion to enable smaller lenders to continue supporting Australian consumers and small businesses.
They hope it will enable customers of smaller lenders to continue to access affordable credit as the world deals with the significant challenges presented by the spread of coronavirus.
The moves by the RBA and Federal Government have been rolled out to try and keep Australians in jobs and easy the burden on business who are struggling with the economic fallout of the coronavirus pandemic.
The central bank is also flagged to release other measures to support the economy.
This includes the following:
• A target for the yield on 3-year Australian Government bonds of around 0.25 per cent.
• A term funding facility for the banking system, with particular support for credit to small and medium-sized businesses.
The spread of the coronavirus in Australia and across the world has cemented the likelihood the national economy will fall into recession this year, as consumer spending and productivity slumps.
Treasurer Josh Frydenberg tried to reassure Australians today the “Australian financial system remains strong”.
“What the Reserve Bank has endeavoured to do here is not only to increase the flow of credit but to incentivise the banks to provide even more money to the small and mediums-sized businesses across the country,” he said in a press conference.
“The hairdressers, the mechanics and all the other small businesses that form the backbone of the Australian economy.
“All of the measures are designed to do two things, decrease the cost of credit and increase its flow.”
Financial comparison RateCity’s spokeswoman Sally Tindall told News Corp the move meant “some rates could fall as low as 2.25 per cent and the majority of banks will now be offering rates under three per cent”.
“These are unprecedented times where some people are looking down the barrel of reduced hours or losing their jobs,” she said.
“This rate cut will hopefully will give some homeowners much-needed relief however if you do have trouble paying their home loan call your bank straight away to see if they can help.”
For savers she said “it’s another blow especially people who go above and beyond to get bonus interest rates because they are the ones to take the biggest hit”.
ANZ economists have warned the economy could contract by as much as two per cent in the June quarter, risking a rise in the jobless rate to almost eight per cent from around five per cent now.
“Workers in industries such as tourism, education and retail are already being laid off and this will only worsen under travel bans, cancellations of large events and social distancing,” ANZ said in a research note to clients.
Finance Minister Mathias Cormann said the upcoming government economic package, which will follow $17.6 billion worth of support announced last week, will be “significant”.
“The extent of the economic impact has been accelerating significantly,” he told Sky News on Wednesday night.
The government is aiming for business-focused measures that cushion the impact of the crisis and may include cash payments or loan support for small and medium-sized businesses.
The government’s first stimulus package included $750 one-off payments for pensioners and welfare recipients, as well as grants of up to $25,000 for small business.
The Australian Chamber of Commerce and Industry has recommended a range of measures for the second package, including help for businesses to keep employees as well as concessional loans to assist with cash flow restraints.
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Australia’s small business and family enterprise ombudsman Kate Carnell has urged the government to include sole traders in its support package, as they can’t access the grants on offer.
Senior Labor figure Penny Wong said the second package needed to be comprehensive and include help for casual workers.
“(They) face a dreadful decision if they are asked to isolate, of either doing the right thing by the community and public health, but not being able to put food on the table for their families,” she told ABC News.
“We should not put them in that position.”
– with AAP
Originally published as ANZ and NAB drop rates as banks offer $8b lifeline to deal with coronavirus outbreak
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