National Australia Bank is the first of the big four banks to announce it will cut its standard variable home loan rate after the Reserve Bank of Australia slashed the cash rate on Tuesday.
From May 4, NAB will slice 32 basis points from its variable mortgage rate, taking it from 7.31 per cent to 6.99 per cent per annum, but it is not passing on the full 50 basis points delivered by the RBA.
Federal Treasurer Wayne Swan described the decision as an insult and said unhappy bank customers should switch lenders.
“This decision is an insult to hardworking Australians with a mortgage or who own a small business who will rightly feel short-changed,” Mr Swan said.
NAB says the decision will save its customers $80 a month in interest on an average $300,000 home loan.
It also will cut 32 basis points from its standard variable business loan rate and 50 basis points from its iSaver savings account, taking that rate down to 3.65 per cent a year.
In a statement explaining the decision, NAB group executive for personal banking Lisa Gray said all Australian banks were paying more for deposits and wholesale funding due to instability in the global economy.
“By maintaining the lowest standard variable rate of the major banks, we have sought to continue to shield our customers from current global economic instability,” Ms Gray said.
“Decisions on lending rates are not taken lightly, but we are determined to provide our customers with certainty through our commitment to stay the lowest of the major banks for the rest of 2012.”
Morningstar banking analyst David Ellis said he was surprised at the speed of the decision, because there is no incentive for any bank to go first.
“What we’ve seen in the past few years, of course, is when they’ve made interest rate decisions first they’ve copped significant political and media backlash,” Mr Ellis said.
The Reserve Bank eased the official cash rate by 50 basis points on Tuesday, dropping the rate to its lowest level since December 2009.
The RBA said part of the move was to counter banks’ recent rate increases, and the remainder was to stimulate the economy.
Reserve Bank governor Glenn Stevens indicated that the size of the cut was necessary to ensure banks cut their rates to below the levels of December last year.
Regional lender Bank of Queensland was the first bank to announce it would cut its standard variable rate, by 35 basis points.
Neither Westpac nor Commonwealth Bank have announced their moves, while ANZ Bank now reveals its monthly rates decision on the second Friday of the month.
The major banks blame rising funding costs for not easing their lending rates in line with the Reserve Bank.
Australian Bankers’ Association chief executive Steven Munchenberg also says banks are facing increased cost pressures, and cannot sacrifice profits by continually absorbing these costs.
On Wednesday morning, ANZ Bank posted a 10 per cent jump in first-half profit to $2.9 billion for the six months to the end of March.
Westpac will announce its half-year profit result today.