New rates from lenders in response to May cash rate announcement: Special Report

Despite 96 per cent of leading economists and commentators predicting another standstill according to a recent survey conducted pre the CPI announcement*, the RBA decided to cut the official cash rate to 1.75 per cent – the first move since May 2015.

Why would inflationary concerns motivate this move?

Core inflation is down to 1.6 per cent, well below the Reserve Bank’s target range of 2-3 per cent. This is the first time since 2008 that we have actually seen a quarterly deflation result. Furthermore, the 0.2% drop in CPI represents a figure 0.4% less than the 0.2% increase that most economists were expecting pre-announcement.

What else might be pushing this?

Economic pundits have been suggesting that the AUD may be overvalued putting downward pressure on export sales and the economy. Similarly, the Turnbull/Morrison Federal Budget is much less austere than the Abbott/Hockey Budget – perhaps indicating an appreciation of these concerns to do with the need for fiscal economic stimulus despite calls for an equally austere budget.


Where are delivery rates for home loans headed?

As most people know, the cash rate only forms a part (especially for non bank lenders) of the picture when it comes to delivery rates for regular home loan borrowers. Factors such as market competition, compliance overheads and managing stakeholder expectations all form a part of how lenders price their home loans.

Add to this mix regulatory requirements (APRA) and the desire of the RBA/APRA to manage the sustainability of property lending, and as Cameron Kusher of CoreLogic has pointed out: “The spread between the cash rate and standard discounted mortgage rate has been widening since 2008 when there was 1.8 percentage points difference between the two rates”, “By April 2016, the spread has doubled to be 3.65 percentage points and is likely to widen further if the full rate cut isn’t passed on by lenders to mortgage rates”.

“With home values still showing some upwards momentum, lower mortgage rates are likely to provide some further stimulus to the housing market, which the Reserve Bank will be monitoring closely.”

Sounds complicated! Well – it is. On one hand it appears we have pressure to decrease the cash rate due to macroeconomic considerations. On the other hand we have pressures to resist rate drops (or increase rates) coming from lender desire to deliver healthy profits to their stakeholders whilst simultaneously tightening lending criteria and limiting new loan creation to meet regulatory concerns.

Lender rate movements (SVR) in response to May RBA cash rate announcement

Listed below are the changes in the lender Standard Variable Rate (SVR) for a selection of lenders from the Naritas lender panel.


Lenders (alphabetically listed) Change Date Effective
Adelaide Bank -0.17% 30 May 2016
Australian Military Bank -0.25% 27 June 2016
AMP -0.20% 23 May 2016
ANZ -0.19% 13 May 2016
Auswide Bank -0.20% 25 May 2016
Bank Australia -0.10% 23 May 2016
Bank of Melbourne -0.25% 23 May 2016
Bank of Queensland -0.25% 18 May 2016
Bank of Sydney -0.27% 27 May 2016
bankSA -0.25% 23 May 2016
Bankwest -0.20% 20 May 2016
Beyond Bank -0.10% 20 May 2016
Bendigo Bank -0.20% 30 May 2016
Bluestone  TBA  TBA
Citibank -0.21% 23 May 2016
Commonwealth Bank -0.25% 20 May 2016
Firstmac -0.25% 23 May 2016
Heritage Bank -0.20% 23 May 2016
Homeloans Ltd TBA TBA
Hunter United Credit Union -0.25% 01 June 2016
ING DIRECT -0.25% 20 May 2016
La Trobe -0.50%  23 May 2016
Liberty Financial -0.25% 01 June 2016
Macquarie Bank -0.20% 09 May 2016
ME Bank -0.05% 16 May 2016
Mortgage Ezy -0.25% 17 May 2016
MyState Financial -0.23% 30 May 2016
NAB -0.25% 16 May 2016
Newcastle Permanent Building Society -0.25% 19 May 2016
People’s Choice Credit Union -0.21% 17 May 2016
Pepper -0.25% 23 May 2016
PLAN Lending  -0.25% 16 May 2016
QANTAS CU (now Qudos Bank) -0.25% 19 May 2016
RAMS -0.25% 23 May 2016
RESI (now YBR) -0.25% 25 May 2016
St.George Bank -0.25% 23 May 2016
Suncorp -0.20% 25 May 2016
Virgin Money -0.25% 18 May 2016
Westpac -0.25% 23 May 2016

NB: Figures listed above are current as of 01/06/2016. This table will be updated daily until all lenders have announced their changes to SVR. Not all lenders adjusting product pricing uniformly for new business and existing customers. Similarly, pricing may vary between individual products and classifications of borrowers (for example owner occupier vs. investment loan purposes).


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*Study commissioned by Hive Empire Pty Ltd