All four big banks have passed on the full central bank rate cut, saying they want to support customers in a tough economic period even though their own costs are rising.
ANZ has also moved to avoid the intense public pressure that follows RBA rate changes by introducing a regular monthly announcement of its interest rates.
ANZ was the first of the big four to announce it was passing on the official quarter of a percentage point interest rate cut.
It was followed later on Tuesday by National Australia Bank and then Commonwealth Bank.
Westpac was the last of the big four to announce it would pass on the rate cut in full.
Bank of Queensland and ME Bank both announced 25 basis point cuts to mortgage rates on Tuesday, the same that the Reserve Bank of Australia cut its cash rate to 4.25 per cent from 4.50 per cent.
ANZ’s CEO for Australia, Philip Chronican, said the decision to cut standard variable mortgage and small business loan rates by 0.25 percentage points had been one of the most difficult in recent times.
The bank’s funding costs have been rising since August, he said.
“We have been watching margins contract, and obviously from a commercial viewpoint there was a lot of logic around why we should not reduce the rates by 25 basis points this time,” Mr Chronican told AAP.
“But at the same time you’ve seen employment data and you’ve seen some of the other economic statistics coming out showing that customers are doing it tough, and we have to balance those two factors at this point.”
Mr Chronican said the bank had also been mindful of the intense public interest in the rate decision.
The bank had not sought to access international funding markets recently, but higher costs on the covered bonds market and increasingly intense competition for deposits were inflating its costs, he said.
ANZ did not need to access offshore funding markets in the near future, but at some point it would need to, Mr Chronican said.
ANZ will now announce its retail and small business variable interest rates on the second Friday of each month, a move designed to end intense public pressure on the bank after a move in the cash rate.
UBS analyst Jonathan Mott said ANZ had formalised the discretion it always had to move rates independently of the RBA.
This was likely to lead to more rate changes for businesses and consumers in Australia and more disclosure from ANZ on funding costs in the future, Mr Mott said in a note to clients.
Banks’ funding costs were now largely unrelated to the cash rate, Mr Chronican said.
NAB group executive for personal banking Lisa Gray said the bank had offered the lowest standard variable home loan rate among the major banks for over two years.
“Our commitment is to be competitive and we think that our track record speaks for itself,” she said.
NAB’s new standard variable rate would be 7.22 per cent, compared to ANZ’s 7.30 per cent, Westpac’s 7.36 per cent and Commonwealth Banks’s 7.31 per cent.
“This has been a difficult decision, where we have had to weigh the concerns of our customers and the community with the rising cost of funds,” Ms Gray said.
ANZ and NAB’s new variable home loan rates will be effective from December 16
NAB’s business rates will be reduced from December 19 as will Westpac and Commonwealth Bank.
