The Commonwealth Bank became the first of Australia’s big four banks to respond to Tuesday’s RBA rate cut after making an announcement last night that it would cut 0.13% off variable home loan interest rates for its owner occupier borrowers.
The move from Commbank follows on the heels of the RBA’s decision to slash 0.25% off the official cash rate at its October meeting in Sydney yesterday, with the rate now sitting at an historic low of 0.75%.
The Commonwealth Bank's move will impact a number of owner occupier and investor home loans, with the changes coming into effect on 22 October, 2019.
• 0.13% reduction to Standard Variable Rate home loans for owner occupiers making principal and interest repayments. New rate will sit at 4.80% (4.95% comparison rate*)
• 0.13% reduction to Standard Variable Rate home loans for owner occupiers making interest-only repayments. New rate will sit at 5.29% (5.44% comparison rate*)
• 0.13% reduction to Standard Variable Rate home loans for investors making principal and interest repayments. New rate will sit at 5.38% (5.53% comparison rate*)
• 0.25% reduction to Standard Variable Rate home loans for investors making interest-only repayments. New rate will sit at 5.64% (5.79% comparison rate*)
Angus Sullivan, Group Executive Retail Banking Services at the Commonwealth Bank, said that the bank weighed up the interests of both borrowers and savers in the decision.
“As the Reserve Bank cash rate has reached record lows, we face a difficult balancing act between the multiple, valid interests of our stakeholders. Particularly given it is currently not feasible to pass on the full rate reduction to more than $160 billion of our deposits which are at, or near, zero rates," he said.
“In balancing these interests, we have carefully considered how to best meet the needs of over 6 million savings customers – who may find it challenging to make ends meet with record low savings interest rates – with the needs of our 1.6 million home loan customers, who want to pay less on their mortgages."
RELATED: Interest rates hit 0.75% after October RBA meeting, so has your lender passed on the full cut?
However, Commonwealth Bank mortgage customers may be less than happy with the decision, as the bank has now failed to pass on the full 0.25% RBA rate cut for a second consecutive time.
In fact, since the Reserve Bank first cut rates in June 2019 the Commonwealth Bank has only passed on 0.57% to variable home loan customers, despite the official cash rate having fallen by 0.75% over that same period.
This is in stark contrast to a handful of challenger and online lenders, with the likes of Athena Home Loans and Homestar having already passed on Tuesday’s cut in full - that’s on top of passing on the full 0.25% June and July RBA cuts as well.
The Commonwealth Bank's Standard Variable rate offer, which offers rates from 4.80% (4.95% comparison rate*), also remains well above the current average variable home loan rate for owner occupiers making principal and interest repayments in the Mozo database.
As of October 1, the average rate in the Mozo database sat at 3.87%, and it’s likely to fall further even further as other lenders make adjustments to their own rates following the RBA cut.
RELATED: Athena Home Loans springs into action, passes on full 0.25% cut
Ready to compare your existing home loan rate to other offers on the market? Check out some of the competitive rates in the table below, or check out Mozo’s home loans comparison tables for an even more extensive range of deals.