THE Commonwealth Bank has broken step with the Reserve Bank, announcing it will not pass on in full the latest cut to the official interest rate.
In a move that risks antagonising the bank’s army of mortgage customers, the CBA announced late yesterday it would cut its standard mortgage rate by 0.2 percentage points.
It came as economists speculated the rate-cutting cycle may be over after the RBA cut the official interest rate by 0.25 percentage points, to a new record low of 2 per cent.
The widely anticipated move comes as the RBA works to lower the Australian dollar and grapples with falling earnings from key commodity exports such as iron ore.
ANZ promptly announced it would pass on the cut in full, effective on Friday, taking its standard variable mortgage rate to 5.38 per cent.
The CBA, Australia’s biggest mortgage lender, said it would wait until next Wednesday to cut its rate to 5.45 per cent, while increasing rates on some savings accounts.
CBA retail banking executive Matt Comyn said the group had “carefully considered the impact of the current environment and moved to balance the needs of our customers”.
National Australia Bank and Westpac were yet to announce how they would react last night.
Discussing the RBA’s statement announcing the cut, Westpac chief economist Bill Evans said the central bank had delivered a more upbeat assessment on the economy “with the obvious implication that rates are likely to be on hold for some time”.
HSBC chief economist Paul Bloxham said the RBA was likely “done for now”, while JP Morgan economist Stephen Walters said the central bank’s statement suggested the easing cycle “ends today”.
The sharemarket ended the day lower and the Aussie dollar spiked as investors speculated the cut may signal an end to the easing cycle.
The dollar dropped from US78.54c to US77.88c as the RBA announced its monthly decision before surging to a high of US79.14c in late afternoon trade.
RBA governor Glenn Stevens has said he would like to see the dollar below US75c to help fire up non-mining parts of the economy.
CommSec chief economist Craig James said the spike in the Aussie was likely to have been driven by currency speculators closing out trading positions on the back of the RBA’s latest announcement.
“The bell has been rung,” Mr James said. “The message from the Reserve Bank is that rates are low enough, now go out and embrace the attractive borrowing conditions and spend, invest and employ.”
The cut will save homeowners $46 a month on the average $300,000 mortgage.Author: John Dagge
Source: Herald Sun