Swan Wants Customers To Feel The Full Benefit

The Age

Wednesday December 3, 2008

By ERIC JOHNSTON

ANZ and Westpac have come under criticism from Treasurer Wayne Swan for failing to pass on to customers the full benefit of the Reserve Bank's rate cut, with both lenders blaming financial market turmoil for pressuring funding costs.

Still, two of the nation's biggest lenders, Commonwealth Bank and National Australia Bank, were quick to match the central bank, pledging a 1percentage-point cut to lending rates.

For both banks, their standard variable mortgage rate will drop to 6.74 per cent, taking home loan rates to five-year lows. NAB calculates its move will save customers $250 a month in interest on an average $300,000 home loan.

Westpac, which has just finalised its merger with StGeorge Bank, lowered rates by 80 basis points to 6.91 per cent.

ANZ, in a attempt at one-upmanship over its traditional rival, settled on a cut of 83 basis points for customers. This also takes ANZ's standard variable mortgage rate to 6.91per cent.

Banks have held back passing on some of the RBA's interest rate cuts this year, blaming the global financial crisis for causing wholesale funding costs to skyrocket. Last month the major banks passed on just two-thirds of the 75-basis-point official rate cut.

For many banks, deposits only make up about half their funding needs, forcing them to tap overseas markets to make up the difference. The global financial crisis has caused a freeze in funding, sending costs higher.

But with recent government measures, such as a wholesale funding guarantee easing funding pressures, banks are coming under political pressure to pass on rate benefits to customers.

Meanwhile, concerns have been raised over the Big Four banks tightening their grip on the nation's mortgage market, with the funding freeze forcing many smaller non-bank lenders to close their doors.

A parliamentary committee last week raised doubts over whether big banks were actively competing with each other.

Mr Swan yesterday welcomed the full percentage-point move by CBA and NAB and called on the others to follow quickly. "They better get their skates on," Mr Swan said.