Wizard cuts rates before RBA
(1 September 2008 – Australia) By cutting its interest rates before this months RBA meeting, Wizard Home Loans has led the first variable interest rate cut in seven years.
The announcement came three days before the Reserve Bank of Australia (RBA) decides whether to implement a rate cut.
Economists have predicted an interest rate cut in September, due to a combination of a slowing economy, deteriorating business conditions and tight credit markets.
Wizard chairman, Mark Bouris, said that the decision by Wizard has challenged banks to pass on a fairer share of their profits.
Further, he said that this signals the return of competition in the banking sector. He indicated that while banks have been slowly increasing their profit margins, this will bring them back in line.
Wizard will cut its variable rate from 9.54 to 9.29 percent effective from the morning before the RBA meeting. The interest rate cut will remain in place even if the RBA keeps rates on hold.
Bouris added that it is a risk, but the decision was made because the cost of funding of their mortgages has fallen, irrespective of the cash rate, and it is only fair to pass that saving on to Wizard customers.
Federal Treasurer, Wayne Swan agreed, saying that there have been changes in funding costs on international markets and reductions recently.
This means that banks will have the capacity to further reduce rates given those reductions in other funding costs outside the Reserve Bank cycle, Swan said in Brisbane.
Over time there will be no excuse not to further cut rates if funding costs continue to come down, he concluded.
Economists have predicted an interest rate cut in September, due to a combination of a slowing economy, deteriorating business conditions and tight credit markets.
Wizard chairman, Mark Bouris, said that the decision by Wizard has challenged banks to pass on a fairer share of their profits.
Further, he said that this signals the return of competition in the banking sector. He indicated that while banks have been slowly increasing their profit margins, this will bring them back in line.
Wizard will cut its variable rate from 9.54 to 9.29 percent effective from the morning before the RBA meeting. The interest rate cut will remain in place even if the RBA keeps rates on hold.
Bouris added that it is a risk, but the decision was made because the cost of funding of their mortgages has fallen, irrespective of the cash rate, and it is only fair to pass that saving on to Wizard customers.
Federal Treasurer, Wayne Swan agreed, saying that there have been changes in funding costs on international markets and reductions recently.
This means that banks will have the capacity to further reduce rates given those reductions in other funding costs outside the Reserve Bank cycle, Swan said in Brisbane.
Over time there will be no excuse not to further cut rates if funding costs continue to come down, he concluded.
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