RBA Governor Philip Lowe said the decision was made to support the economy as it responds to the global coronavirus outbreak.
"The global outbreak of the coronavirus is expected to delay progress in Australia towards full employment and the inflation target," Dr Lowe said.
"The unemployment rate increased in January to 5.3% and has been around 5¼% since April last year.
"Wages growth remains subdued and is not expected to pick up for some time."
Dr Lowe said the board was prepared to ease monetary policy further if required, with many economists predicting another cut in April and the potential introduction of quantitative easing.
In response, Westpac almost immediately announced they were passing on the cut in full, followed by NAB, Commonwealth Bank and lastly ANZ.
It's a far cry from the October RBA rate cut, where not one of the big four passed on the full 25 basis point cut.
This month however they have clearly heeded the Prime Minister's pleas: In a press conference prior to the RBA decision on Tuesday morning, Scott Morrison urged the majors to pass on a potential cut in full.
"There is no doubt that if the Reserve Bank were to take a decision today on cash rates that the government would absolutely expect the four big banks to come to the table and to do their bit in supporting Australians as we go through the impact of the coronavirus," Mr Morrison said.
Check out the full range of cuts from each of the big four below:
You can also check out a comprehensive list of lenders and their respective rate cuts here.
Westpac rate cut
Less than five minutes after the central bank's announcement, Westpac announced they were passing on the 25 basis point cut in full.
The new rates will come into effect on Tuesday 17 March.
According to Westpac:
- Variable home loan (owner occupier) rate has been reduced by 0.25% p.a. to 4.58% p.a. for customers with principal and interest repayments.
- Variable residential investment property loan rate reduced by 0.25% p.a. to 5.13% p.a. for customers with principal and interest repayments.
- Variable home loan (owner occupier) rate reduced by 0.25% p.a. to 5.17% p.a. for customers with interest-only repayments.
- Variable residential investment property loan rate reduced by 0.25% p.a. to 5.39% p.a. for customers with interest-only repayments
What Westpac said:
Westpac Chief economist David Lindberg said they would support customers and the economy through this unprecedented global event.
“We recognise 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,” Mr Lindberg said.
“This will give our variable home loan and small business customers more money in their back pocket.
“Our home loan customers can also take advantage of our lowest variable home loan rates in 50 years to help purchase their next home, or pay more off their mortgage faster.
“While this is the right decision, pricing changes are increasingly challenging as the cash rate heads towards zero. We will continue to review our rates on a case-by-case basis taking into account the diverse range of stakeholders and factors which influence the cost of funding."
Commonwealth Bank rate cut
CBA announced not long after Westpac that they were also passing on the 25 basis point cut in full for variable loans, effective from 24 March.
According to Commonwealth Bank:
- Owner-occupied principal and interest standard variable rate home loans reduced by 0.25% p.a. to 4.55% p.a.
- Investor principal and interest standard variable rate home loans reduced by 0.25% p.a. to 5.13% p.a.
- Owner-occupied interest-only standard variable rate home loans reduced by 0.25% p.a. to 5.04% p.a.
- Investor interest-only standard variable rate home loans reduced by 0.25% p.a. to 5.39% p.a.
What Commbank said:
Angus Sullivan, Group Executive Retail Banking Services said the bank understood the country was facing unique challenges currently and was proud to pass on the cut in full.
“In responding to this latest official interest rate cut we have examined the important role we play in supporting the Australian economy and the unique set of circumstances facing the country," Mr Sullivan said.
“Today’s announcement means our SVR for Owner Occupied customers, with Principal and Interest repayments, will be one of the lowest on record.
“We will also be proactively contacting eligible home loan customers to notify them of the new variable rates.
"We encourage customers to take advantage of these record low interest rates and contact us to reduce their minimum repayment, which will put extra money in their account each month.”
NAB rate cut
Ninety minutes after the RBA's announcement, NAB announced it was lowering home loan variable rates by the full 25 basis points, effective from 13 March.
According to NAB:
- Owner-occupied principal and interest standard variable rate home loans reduced by 0.25% p.a. to 4.52% p.a.
- Investor principal and interest standard variable rate home loans reduced by 0.25% p.a. to 5.12% p.a.
- Owner-occupied interest-only standard variable rate home loans reduced by 0.25% p.a. to 5.09% p.a.
- Investor interest-only standard variable rate home loans reduced by 0.25% p.a. to 5.42% p.a.
What NAB said:
NAB Chief Customer Officer Consumer Banking Mike Baird said the decision would support households and encourage cashflow into the economy.
“In making these decisions we have had to consider the unprecedented challenges of the low interest-rate environment and impacts of the bushfires and coronavirus outbreak on our customers and the broader economy,” Mr Baird said.
“NAB has a track record of seeing our customers through difficult economic conditions and we will continue to lend and support our customers.”
Mr Baird said that NAB had delivered the largest standard variable rate cuts of the major banks over the past 12 months.
“We understand that for our customers the extra money saved on their mortgages can be used in different ways,” Mr Baird said.
“Some choose to pay down their loans faster while others are choosing to reduce monthly repayments to help with the household budget. Our role is to offer our customers choice.”
ANZ rate cut
ANZ was the last of the big four to cut in October, announcing two hours after the RBA's statement that they too would be passing on 25 basis points in full for variable rate customers.
In addition, investor interest-only loans will be reduced by 35 basis points.
The new rates will be effective from Friday 13 March.
According to ANZ:
- For Standard variable rate owner-occupiers paying principal & interest, the index rate will decrease by 0.25% to 4.54%pa.
- For Standard variable rate investors paying principal & interest the index rate will decrease by 0.25%pa to 5.14%pa.
- For Standard variable rate owner-occupiers paying interest-only the index rate will decrease by 0.25%pa to 5.09%pa.
- For Standard variable rate investors paying interest-only the index rate will decrease by 0.35%pa to 5.39%pa.
What ANZ said:
ANZ Group Executive Australia Retail & Commercial Mark Hand said ANZ was committed to supporting its customers and the economy through this period of uncertainty.
"The decision by the Reserve Bank to reduce the cash rate to historically low levels highlights the significant impact the outbreak of COVID-19 is already having on the global economy," Mr Hand said.
“While there were a range of factors considered in making this decision, ANZ is prepared to play its role in supporting both our customers and the broader economy through this period of uncertainty.
“Customers wanting to increase the money in their pocket each month can contact us to decrease their monthly minimum payments.
"We also have competitive fixed-rates available for those looking to lock in these historically low rates.”
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