Banks cut rates in response to RBA decision
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With the RBA cutting rates by 0.25% in April to 3.00%, a 49 year low, the bank gave a clear indication the market is nearing its low in the interest rate cutting cycle.
The RBA is likely to lower the offical cash rate by only another quarter to a half percent before it reaches the bottom of the rates cycle. From that point it will only stay low for a short period it would seem until rates start rising if previous recessions are anything to judge.
In response to the bank cuts Westpac, St George, Commonweath Bank and ANZ all cut their rates by 0.10%, NAB failed to pass on the cut. The decision by the banks gives the RBA some additional margin to cut further in a time when the economy is about to start the early phase of what is expected to be a short and sharp recession.
While all the banks have been under considerable funding pressure the majors have all come through this with a massive increase in market share as the expense of the second tier banks and the non-bank lenders. The majors now have easliy in excess of 90% market share and margins considerly higher then previosuly. Despite the rise of loan defaults the additional margins by the banks have given them a tremendous position of strength that few global banks share.
One thing is certain that the Australian banks are world leading and banks like ANZ who are looking to expand now into Asia are doing so from a position of strength that will setup growth for the next decade.
St George cut variable rates by 0.85%
St George Bank today announced plans to cut their standard variable home loan by 0.85% to 6.89%, the rate change takes effect from 8 December 2008.
St George became the latest bank to fail to pass on the full 100 basis point cut made by the Reserve Bank yesterday. Only NAB and the Commonwealth Bank passed on the full rate cut, Westpac and ANZ passed on 0.80% and 0.83% respectively.