Major bank announces rate cut

Staff Reporter

Two days after the RBA Board made its announcement, the first full 25 basis point rate cut has been delivered by one of the big four banks.

Effective 16 December 2011, ANZ’s new standard variable mortgage rate will be 7.30 per cent pa (7.40 per cent pa comparison rate). New small business rates are also effective from 16 December.

ANZ said it will also offer a special two-year fixed term mortgage at 5.95 per cent pa available from 12 December – a reduction of 0.20 per cent pa on the current two-year rate and 1.35 per cent pa lower than ANZ’s new standard variable rate.

ANZ CEO Australia Philip Chronican said: “In the face of the economic and banking crisis in Europe, our decision on the size of the interest rate change has been one of the most difficult we have made in recent times. Retail banking margins have been contracting as the cost of funds has progressively risen over the last six months.

“Bank funding costs are now largely unrelated to movements in the Reserve Bank’s official cash rate. We have therefore taken a decision to announce future pricing changes for retail and small business variable interest rates on the second Friday of each month.

“This provides a measure of predictability for customers on when rate changes will occur and it provides us with the flexibility to reflect movements in funding costs across the full spectrum of funding sources – not solely in response to the Reserve Bank’s cash rate.

“We know many people in the community are doing it tough at the moment and, on this occasion, we felt that a decision to reduce interest rates by 0.25 per cent pa for home borrowers and for small business was the right one in the circumstances.

“The significance of the crisis in Europe however has real consequences for the global economic outlook, for the Australian economy and for bank funding costs,” he said.