NAB, Westpac, ANZ cut business and mortgage interest rates

Banks offer support to customers hit by the COVID-19 pandemic in slicing interest rates.

NAB has cut mortgage and business loan interest rates in the wake of the RBA’s out-of-cycle reduction of the official cash rate on Thursday. Picture: AAP

National Australia Bank, Westpac and ANZ on Friday announced cuts to interest rates and financial support for small businesses.

NAB followed CBA’s Thursday announcement to be the second major lender to cite the impact of the COVID-19 pandemic in slicing interest rates on business loans and fixed-rate mortgages, while stopping short of cutting variable home loan rates.

In a statement issued on Friday, NAB said it would reduce variable rates on small business loans by 100 basis points, effective March 30, adding to a 25 basis point cut on March 13.

The nation’s largest business bank will also slash 200 basis points from the rate on new loans and all overdrafts on its digital business product QuickBiz, effective March 30.

For fixed rate mortgages, NAB is making reductions of up to 60 basis and it is also allowing home loan customers experiencing “financial challenges” a repayment pause for up to six months.

Westpac’s acting CEO Peter King on Friday announced a $10bn home lending fund to support the economy and said small business overdrafts would be reduced by 200 basis points as well as a 100 basis point reduction to variable interest rates on small business cash-based loans.

Westpac acting CEO Peter King. Picture: Ryan Osland

Westpac said interest rates on its one-, two- and three-year owner occupied fixed rate home loans for principal and interest repayment customers with a Premier Advantage Package would be 2.29 per cent per annum from 27 March.

It would offer a special 12-month term deposit of 1.7 per cent, an increase of 70 basis points, and for Australians aged 65 years or over, the rate would be 2 per cent a year for eight months, effective 27 March.

ANZ announced a support package for small business and home loan customers with the potential to inject $6bn into the Australian economy and assist in the recovery from the current COVID-19 crisis.

The package included a reduction of some fixed-rates of 80 basis points per annum on new loans for small business and 49 basis points points per annum for home loan customers, as well as a reduction of variable small business rates of 25 basis points per annum and variable home loan rates of 15 basis points per annum.

ANZ small and medium business customers and home loan customers impacted by the crisis can request a deferral on loan repayments for up to six-months, the bank said in a statement.

Commonwealth Bank in making changes after the Reserve Bank of Australia took drastic measures this week to shield the economy from the fallout of the pandemic, including an out of cycle 25 basis point rate cut. That – alongside a huge bond buying and business lending program – took the cash rate to a new record low of 0.25 per cent.

CBA is reducing its one, two and three-year fixed rate home loans by 70 basis points to 2.29 per cent, but not adjusting variable rates. The bank also announced on Thursday a 100 basis point interest rate reduction for all existing cash-linked small business loans.

NAB said its package for customers could provide an injection of more than $10bn into the economy over six months, or $380m a week, depending on customer take-up.

“These measures will provide significant relief to businesses and homebuyers over the next six months as we all deal with this unprecedented situation,” NAB chief executive Ross McEwan said.

“Businesses in particular need help and they need it now, so we have come through with a range of measures. This support will provide cash flow relief so they can stay open, and keep people in jobs. One third of Australia’s small to medium businesses bank with NAB and we are going to be there for them.

“The changes also offer our home loan customers the option to fix their rate at our lowest rate ever, or pause payments to help ease financial pressures.”

For depositors, NAB has introduced a 10-month term deposit rate of 1.75 per cent per annum “in recognition that this low interest rate environment is hurting savers”.

Mr McEwan told The Australian that the business challenges of the coronavirus crisis were fundamentally different to those created by the 2008 financial crisis.

The financial crisis “rolled through” the global economy for six to 12 months.

“This is a different challenge because it’s happened very quickly,” he told The Australian.

“If you want to pick up a cab or go to a cafe or restaurant at the moment, they’ll tell you how quickly this has happened and I don’t think we’ve seen that before.”

The NAB chief said the bank had accepted that the health crisis could continue for “another three months or so”, and customers would need to repair their financial positions for a further three months.

The Australian Banking Association on Friday announced a sweeping initiative for small and medium businesses affected by COVID-19, granting then a repayment holiday for six months.

“We support the measures announced by the ABA today and welcome recent actions taken by the federal government, Reserve Bank of Australia and APRA. We will continue to work with the government and regulators on further initiatives,” Mr McEwan said.

“This is an extremely difficult time but we will get through this together. For more than 160 years, NAB has supported Australians through challenges. We are well-capitalised and stand ready to play our critical role.”