Caroline Henshaw Dow Jones Newswires December 05, 2012
WESTPAC, Commonwealth Bank of Australia and National Australian Bank today passed on only part of the central bank's interest rate cut this week.
Westpac late today joined its rivals in reducing its standard variable mortgage rate by 20 basis points, taking the nation's second largest bank's lending rate to 6.51 per cent per annum, from December 17.
CBA, Australia's largest lender by market value, said it would reduce its standard variable home loan rate, the type used by the majority of Australians, by 20 basis points to 6.4 per cent from December 10.
The move followed rival NAB's 20 basis point reduction to 6.38 per cent from December 10. That equates to a saving of around $50 a month on an average $300,000 mortgage. NAB has promised to offer the lowest standard variable rate of the big four banks until the end of 2012. ANZ, which makes its rates decisions on the second Friday of each month, would have to cut its rates by at least 23 basis points to offer a lower rate than NAB.
The Reserve Bank of Australia, or RBA, yesterday cut its benchmark rate by 25 basis points to 3 per cent, matching a low hit in the aftermath of the global financial crisis as the central bank seeks to stimulate the resource-rich economy in the face of a fading mining boom.
So far only Australia's fifth-largest mortgage lender, ING Direct, a local division of Dutch lender ING Groep, has said it will pass on the full quarter-point cut to customers from December 25. Bank of Queensland yesterday said it would pass on a 20-basis point cut.
CBA said it had to balance the needs of its 1.8 million home loan borrowers against those of its depositors and shareholders.
"A significant factor impacting this balancing of needs has been the increased competition in the domestic deposit market which has benefitted many customers, including those who rely on interest earnings to meet their living expenses," the CBA said.
Jason Yetton, group executive of Westpac retail and business banking, said: "I’m pleased we have been able to take this step for our mortgage customers at the same time as recognising just how important it is to maintain competitive savings rate for our depositors, many of whom depend on the income that they receive from their savings accounts."
"This is happening at a time when competition to provide these rates to savers has pushed up the cost of those deposits to historically high levels, especially when they have become increasingly important to us as we reduce our reliance on other sources of funding to support our lending."
NAB personal banking executive Lisa Gray said the bank held back part of the RBA's interest rate cut because the bank's cost of funding was still high.
“The impact of deposit and wholesale funding costs remain high, resulting from instability in the global economy and low confidence domestically,'' she said in a statement.
Since the RBA started cutting the official rate in November last year, standard mortgage rates have come down from 7.8 per cent to 6.65 per cent. But banks have not passed on in full the RBA's rate cuts this year, citing higher funding costs overseas.
In a statement accompanying yesterday's rates decision, RBA Governor Glenn Stevens said that Australian banks were currently having no difficulty accessing funding.
Additional reporting: AAP, The Australian