Big four banks jump to pass on RBA cash rate cut

Banks move quickly to cut home loans within minutes of the RBA slashing the official cash rate to a record low.

As recently as two weeks ago, markets had priced in almost zero chance of a cut at the March meeting. Picture: AAP

The big four banks all reduced loan rates by 25 basis points on Tuesday afternoon, with CBA and Westpac moving within minutes of the Reserve Bank of Australia (RBA) slashing the official cash rate to a record low of 0.5 per cent.

CBA and Westpac on Tuesday both announced they would reduce variable rates for home loan customers by 0.25 per cent.

The announcement came immediately after the RBA followed through with a widely expected 0.25 per cent cut to the official cash rate.

Westpac will also slash its rate for small business customers by 0.25 per cent, the bank said.

“We recognise 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,” Westpac chief executive for the consumer division, David Lindberg, said.

“This will give our variable home loan and small business customers more money in their back pocket through passing on the full 0.25 per cent interest rate reduction.”

CBA group executive for retail banking Angus Sullivan said the bank had made the decision to pass on the full rate cut because of “the unique set of circumstances facing the country” and because of the bank’s role in supporting the Australian economy.

“We also recognise the importance of managing the business sustainably for the long term and balancing the needs of borrowers and depositors. We will continue to review our pricing and make further adjustments as required,” he added.

The 25 basis point cut will see CBA’s standard variable home loan rate for owner-occupiers drop to 4.55 per cent, while Westpac’s falls to 4.58 per cent.

NAB later announced it would lower home loan, small business and business overdraft variable rates by 25 basis points, effective 13 March.

NAB chief customer officer for consumer banking Mike Baird said the move to fully pass on the rate cut would encourage cashflow into the economy.

“In making these decisions we have had to consider the unprecedented challenges of the low interest-rate environment and the impacts of the bushfires and coronavirus outbreak on our customers and the broader economy,” he said.

ANZ was the last of the big four banks to move, announcing it would decrease variable interest home loan rates in Australia by between 0.25 per cent per annum and 0.35 per cent per annum across a range of standard variable rate indices.

ANZ group executive Australia retail and commercial Mark Hand said: “The decision by the Reserve Bank to reduce the cash rate to historically low levels highlights the significant impact the outbreak of COVID-19 is already having on the global economy.

Read RBA Governor Philip Lowe's statement here

“While there were a range of factors considered in making this decision, ANZ is prepared to play its role in supporting both our customers and the broader economy through this period of uncertainty.”

Macquarie reduced its variable interest rates by 0.25 per cent per annum for home loan customers, effective 19 March.

Suncorp Bank cut by 0.25 per cent per annum for home loan customers following the Reserve Bank of Australia’s cash rate decision, effective from 20 March 2020.

Non-bank Athena also announced it would pass on the full 0.25 per cent rate cut to its retail home loan borrowers, saying it would act “as quickly as we can” to pass it on.

Neobank 86 400 said it would pass on the full cut to new and existing owner-occupier and investment home loan customers as soon as Wednesday.

The RBA rate cut comes as central banks and governments around the world look to cushion the blow from the Covid-19 coronavirus that is sweeping the globe.

But Paul Lewis, the chief executive of Australia’s largest credit union, CUA, said he believed the latest rate cut would hinder consumer sentiment rather than bolster confidence and spending.

“I just don’t know what good can come of it,” he said, noting that after three reductions in official rates last year, borrowers had kept more funds in offset accounts and moved further ahead in paying down their mortgage. “It is going to be very difficult for policymakers.”

Earlier, Prime Minister Scott Morrison urged the major lenders to “do the right thing” by passing on the full rate cut.

Finance Minister Mathias Cormann, meanwhile, confirmed the government would announce an economic response to the coronavirus crisis separate to the RBA’s rate cut.