Yesterday afternoon, the RBA eased monetary policy by 25 basis points from 0.75 to 0.5 of a percentage point.

The sharp turnaround in sentiment from just a week ago, with leading economists predicting a hold, was likely caused by domestic developments and the impact of the coronavirus on the broader economy.

Before the Reserve Bank made its announcement, Prime Minister Scott Morrison highlighted the savings customers are currently having on their mortgage.

“The first is cash rate falls have been 75 basis points since the last election. And our advice is that 70 basis points of those reductions have actually been passed through to consumers, either directly or by consumers getting better deals and actually exercising their own choices,” Mr Morrison stated at a press conference at Parliament House. 

“So, while not all of those rate cuts were passed on by banks, and you know my view on that, I applaud Australian consumers for taking matters into their own hands and making sure that they get the better deal.”

The Prime Minister stated he expected the big four banks to pass on the rate cuts in full, which they did in full. 

“Now, there’s no doubt if the bank were to take a decision today on cash rates that the government would absolutely expect the four big banks to come to the table and to do their bit in supporting Australians as we go through the impact of the coronavirus,” Mr Morrison said. 

Westpac

Westpac Group (including subsidiaries Bank of Melbourne, BankSA and St.George Bank) was the first major bank to reprice its offerings, cutting rates by 25 bps for home loan customers, as well as rates on small business cash-based loans and overdrafts.

From Tuesday, 17 March 2020, Westpac will make the following changes: 

• variable home loan (owner-occupier) rates will be reduced by 25 bps to 4.58 per cent for customers with principal and interest terms
• variable residential investment property loan rates will be reduced by 25 bps to 5.13 per cent for customers with principal and interest terms
• variable home loan (owner-occupier) rates will be reduced by 25 bps to 5.17 per cent for customers with interest-only terms
• variable residential investment property loan rates will be reduced by 25 bps to 5.39 per cent for customers with interest-only terms
• variable interest rates on small business cash-based loans and overdrafts will be cut by 25 bps

According to David Lindberg, Westpac’s chief executive, consumer, the bank’s decision to pass on the full 25 bps was designed to provide relief to customers amid growing concerns regarding the economic impact of the coronavirus outbreak. 

“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,” he 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 p.a. interest rate reduction.

“Our home loan customers can also take advantage of our lowest variable home loan rates in 50 years to help purchase their next home or pay more off their mortgage faster.”

However, Mr Lindberg noted the impact of lower rates on the bank’s margins, adding that Westpac would carefully consider future pricing decisions in the event of further easing from the RBA. 

“While this is the right decision, pricing changes are increasingly challenging as the cash rate heads towards zero. We will continue to review our rates on a case-by-case basis, taking into account the diverse range of stakeholders and factors which influence the cost of funding,” he said.

CBA

The Commonwealth Bank of Australia (CBA) has also passed on the RBA’s cut in full, reducing variable rates by 25 bps.

Effective from 24 March, CBA will make the following changes:

• owner-occupied P&I standard variable rate home loans will be reduced by 25 bps to 4.55 per cent
• investor P&I standard variable rate home loans will be reduced by 25 bps to 5.13 per cent
• owner-occupied interest-only standard variable rate home loans will be reduced by 25 bps to 5.04 per cent
• investor interest-only standard variable home loans will be reduced by 25 bps to 5.39 per cent

Angus Sullivan, group executive, retail banking services, commented: “In responding to this latest official interest rate cut, we have examined the important role we play in supporting the Australian economy and the unique set of circumstances facing the country.

“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.”

Mr Sullivan said the bank would be proactively informing customers of the rate cuts.

“We encourage customers to take advantage of these record-low interest rates and contact us to reduce their minimum repayment, which will put extra money in their account each month,” he said.

NAB

NAB has announced reductions of 25 bps to rates across its variable home loan products, as well as its variable small business options loan and business overdraft facilities.

Effective from 13 March 2020, NAB’s advertised Tailored Home Loan variable rates will be as follows:

• owner-occupied P&I rates have been cut to 4.52 per cent
• investor P&I rates have been cut to 5.12 per cent
• owner-occupied IO rates have been cut to 5.09 per cent
• investor IO rates have been cut to 5.42 per cent

NAB chief customer officer, consumer banking, Mike Baird commented: “In making these decisions, we have had to consider the unprecedented challenges of the low interest rate environment and impacts of the bushfires and the coronavirus outbreak on our customers and the broader economy.

“NAB has a track record of seeing our customers through difficult economic conditions and we will continue to lend and support our customers.

“We understand that for our customers, the extra money saved on their mortgages can be used in different ways.

“Some choose to pay down their loans faster while others are choosing to reduce monthly repayments to help with the household budget. Our role is to offer our customers choice.”

ANZ

ANZ has responded to the RBA’s cut with mortgage rate reductions of between 25 bps and 35 bps.

Effective from 13 March, ANZ’s rates will be as follows:

• owner-occupied P&I rates will decrease by 25 bps to 4.54 per cent
• investor P&I rates will decrease by 25 bps to 5.14 per cent
• owner-occupied IO rates will decrease by 25 bps to 5.09 per cent
• investor IO rates will decrease by 35 bps to 5.39 per cent

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.

“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.”