Westpac, CBA pass on rate cut in full
Westpac has immediately followed the Reserve Bank of Australia's historic decision to cut interest rates to a new record low, passing on the 25 basis point cut in full to its home loan customers.
Within minutes, this decision was followed by rival Commonwealth Bank whose customers will also see the entirety of this afternoon's cut passed on to their home loans.
We’re decreasing variable interest rates by 0.25% per annum for home loan customers, as well as small business cash-based loans and overdrafts. These changes will take effect on 17 March 2020.— Westpac Bank (@Westpac) March 3, 2020
Following the RBA’s cash rate decision we have reduced the variable rates for our home loan customers by 0.25% p.a.— CBA Newsroom (@CBAnewsroom) March 3, 2020
Westpac said in a tweet this afternoon it would reduce the cost of variable interest rates on home loans from March 17, while CBA is yet to announce when its cut will be enacted.
NAB and ANZ are yet to reveal how it will respond to the reduced rate, while smaller lenders NEO Bank and Athena Home Loans passed on the cut in full.
The major lenders were widely expected to hold on to the savings given the dramatically reduced profit margins on home loans, comparison site Canstar's finance expert Steve Mickenbecker said.
"The banks are now walking a very fine line and with savings rates already down around 0.10 per cent, they have very little room to move.
"A 0.25 per cent interest rate reduction to the average $400,000 home loan over 30 years could mean monthly principal and interest repayments falling by $56 to $1,794, and an interest saving of $20,249 over the life of the loan," he said.
Westpac consumer chief executive David Lindberg said the reduction in costs for the lender's home loan customers will allow hundreds of dollars to be saved each year.
"We recognised 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.
The RBA governor Philip Lowe made the drastic decision to cut the official cash rate to a record level after the deadly coronavirus wiped trillions of dollars off global share markets.
"The coronavirus has clouded the near-term outlook for the global economy and means that global growth in the first half of 2020 will be lower than earlier expected," he said in his statement.
"It is too early to tell how persistent the effects of the coronavirus will be and at what point the global economy will return to an improving path."
The first deaths from the coronavirus were reported in both Australia and the US over the weekend, while Italy, Iran and South Korea revealed a spike in cases.
The escalation led to several countries expanding travel restrictions, further crippling economic activity and trading channels and compounding the fiscal pressure from the summer's devastating bushfires and ongoing drought.
is Richardson told news.com.au of the central bank's decision.
"The Australian economy has been in the slow lane, and a summer of bushfires followed by coronavirus has weighed on confidence.
"It's important that the central bank weighs in to remind Australia that we have firepower as well as strong fundamentals."