Banks start passing on rate cut with varying speed

Westpac is the first of the major lenders to say it will pass on today’s 0.25% rate cut in full to its variable rate mortgage holders, though borrowers will have to wait two weeks for some relief. 

The bank says it will cut its standard variable home loan rate by 0.25% to 7.61% per annum with the new rate only becoming effective on Monday, November 14. 

The Commonwealth Bank has also confirmed that it will pass on the full 0.25% to its borrowers, but will cut rates 10 days sooner on November 4 with its base variable rate reducing to 7.05%. 

“A reduction in interest rates will provide a timely boost to sentiment and generate a positive flow-on effect for the broader Australian economy,” said Rob Coombe, group executive Westpac Retail and Business Banking. 

Both banks were beaten to the bell by super fund-owned ME Bank, which announced last week that it would pass on any interest rate cut in full to its customers. 

It confirmed this move today following the RBA decision with Ian Hendey, group executive of brand, product and distribution, saying its decision “highlights the importance of acting in the best interest of customers, especially in an environment where concern over shareholder profit often supersedes customer-centric strategy”. 

“This time last year, when the RBA raised its cash rate by 0.25% p.a., ME Bank bucked the trend by doing the right thing by its customers and only raising its standard variable home loan rates in line with the cash rate rise of 0.25%," he says.

Online lender loans.com.au says it will pass on the full rate cut to borrowers immediately. 

Loans.com.au managing director Marie Mortimer says the interest rate cut would not only be passed through to those who hold existing loans but would be extended to potential borrowers who had already applied for preapproval on their new home loans.

“From Wednesday (November 2), this entire group can expect to save almost $50 a month on the cost of an average home loan of $300,000 as their interest rate will be slashed by the full 0.25%,”she says.