Lower funding costs lead to quick rate cut decisions
(9 May 2013 – Australia) After the Reserve Bank of Australia (RBA) decision to cut rates by 25 basis points on Tuesday, Australia’s banks quickly passed on the cuts to their home loan customers in full.
The banks’ haste to cut rates in full is a spectacular turn-around following failures to pass on the entire rate cuts of the past two years due to higher funding costs.
From the beginning of this year there has been a quick fall in the cost of borrowing on global debt markets.
Banks are once again turning to their bread and butter, becoming more competitive for deposits, in lowering interest rates, this should reignite home lending, a crucial source of profits.
There has also been growing scrutiny by the media over their strong profit growth, with ANZ and Westpac last week reporting annual profit growth of 10 percent or more, and rewarding shareholders with higher dividends.
Commonwealth Bank of Australia, Westpac, National Australia Bank, Suncorp and Bank of Queensland all reduced their mortgage rates by 0.25 percentage points just hours after the cash rate was cut to a record low of 2.75 percent.
ANZ will make its decision at its regular interest rate review on Friday.
Subscribe