CBA, NAB Cut Interest Rate by 20 Basis Points
Four days after the Reserve Bank of Australia (RBA) reduced by 25 basis points the overnight cash rate to 3.25 per cent, two members of the big four announced rate cuts on Friday.
However, the Commonwealth Bank of Australia (CBA) and the National Australia Bank (NAB), like their previous moves in response to the RBA policy, opted to pocket one-fifth of the rate cut, in effect passing on to borrowers only 20 basis points of the central bank's rate cut.
That means beginning Monday, the new standard variable rate of CBA would be 6.6 per cent while that of NAB would be 6.58 per cent. ANZ bank, which currently has a 6.8 per cent interest rate for mortgages with standard variable rate, is expected to announce its rate decision on Friday, Oct 12.
Westpac has yet to make an announcement if it will retain or adjust its current 6.89 per cent lending rate for standard variable mortgages.
Two second-tier Australian banks have similarly made cuts, but also pocketed part of the RBA rate reduction. The Bank of Queensland cut by 20 basis rates its rate to 6.71 per cent, while the Greater Building Society made a 15 basis points reduction to 6.25 per cent.
However, Bankmecu and ING passed in full to borrowers the 25 basis points cut which brought down their standard variable mortgage rates to 6.19 and 6.09 per cent, respectively.
Both CBA and NAB justified their pocketing 5 basis points as balancing the needs of borrowers and shareholders.
"In making the decision, (CBA) has continued to balance the needs of 1.8 million home loan borrowers with those of its 11 million depositors and its shareholders, who include 800,000 Australians who own its shares directly, and millions more Australians who own shares through pension funds," CBA said in a statement.
NAB Group Executive Personal Banking Chief Lisa Gray said its 6.58 per cent interest rate, the lowest among the big four, struck the right balance with its obligations to ensure Aussie banks are safe and secure.
"The increased competition for deposits is pushing up costs, making it more expensive to fund our lending," Ms Gray explained.
