Major banks cut home loan rates by 0.8%

(AAP) The big four banks have all reduced their standard variable home loan rate by 80 basis points, passing on most of the Reserve Bank of Australia's (RBA) full percentage point cut, as they try and recoup some of the increase in funding costs.

Westpac Banking Corporation, which is in talks to buy St George for $17.3 billion,
reduced its rate to 8.56 per cent. The reduction will take effect on October 13, the
Sydney-based bank said in a statement.
St George Bank Ltd late on Tuesday announced that it would reduce its standard
variable home loan rates for new and existing customers by 80 basis points to 8.57
per cent, effective October 13.
The RBA, after its regular monthly board meeting on Tuesday, announced it would cut
the overnight cash rate by 100 basis points to six per cent, effective on Wednesday.
"Westpac will continue to monitor the external environment, and our cost of funding
position, and will look to pass on further interest rate reductions where possible,"
Westpac head of retail and business banking Peter Hanlon said in the statement.
"Since the beginning of September this year, term funding costs have increased to
the highest levels seen since this crisis began over 12 months ago."
Commonwealth Bank of Australia Ltd (CBA), National Australia Bank Ltd, and ANZ
Banking Group Ltd followed with their announcements. CBA and ANZ's reduction will
also take effect on October 13 while NAB's will occur on October 20.
Westpac said about 50 per cent of the bank's lending was funded with deposits, with
the remaining 50 per cent coming from short- and long-term borrowing in Australia
and overseas.
The surge in the cost of credit over the past 12 months prompted the banks to
increase their variable rates independently of the RBA. Their cut on Tuesday, 20
basis points less than the RBA, has increased the margins of the variable rates by
about 75 basis points compared with where they were before the banks started raising
rates independently.
NAB chief executive for Australia Ahmed Fahour said the bank had absorbed about half
the rising cost of funding.
NAB will cut its standard variable rate to 8.56 per cent.
"We will continue to monitor wholesale funding markets and any future interest rate
decisions will reflect an assessment of the total cost of funding," Mr Fahour said
in a statement.
"Above all else, it is our priority to maintain a healthy banking system here in
Australia while balancing the needs of our shareholders and our customers," he said.
Australia's biggest mortgage lender CBA reduced its standard variable rate to 8.53
per cent
"While we are not reducing our variable home loan rates by as much as the RBA
reduction, we do expect global financial markets to normalise over time and once
that does occur we will be able to reduce rates by more than the RBA adjustments,"
CBA group executive retail banking services Ross McEwan said in a statement.
"Our customers can also expect out-of-cycle interest rate reductions."
ANZ reduced its variable home loan rate to 8.57 per cent.
The move by the RBA on Tuesday was expected widely and the 100 basis point reduction
was bigger than the 50 basis point cut economists had predicted.
It was the biggest cut to the overnight rate by the RBA since May 1992.
All four banks cut their variable loan rates by the full 25 basis points after the
RBA cut the overnight rate last month. St George cut its variable rate by 30 basis
points in September.