Further Rate Cuts On Cards

Newcastle Herald

Monday October 20, 2008

By DANNY JOHN SMH

FURTHER across-the-board cuts in lending rates are expected as the major banks switch their focus from the hard-pressed housing market to the wider business sector in an effort to avoid the credit crunch-hit economy slipping into recession.

National Australia Bank yesterday became the second of the "Big Four" banks in three days to announce another 0.2 of a percentage point drop in its interest rates following the move by its rival ANZ on Friday.

ANZ cut its rates by 0.25 per cent, taking the total of its most recent reductions to slightly more than the surprise economy-boosting one percentage point fall announced by the Reserve Bank of Australia (RBA) two weeks ago.

But in a move that reflects growing concern among political, economic and business leaders, NAB said its lower interest rate will apply not only to its mortgages but also to those loans to businesses and the farming industry two of the sectors that the bank counts as its major customers.

For hard-pressed home owners, the mortgage rate will drop to 8.36 per cent from next Monday in a move which will take the savings on the repayments on an average $250,000 loan to more than $200 a month since the RBA's reduction.

Ahmed Fahour, chief executive of NAB's Australian division, underlined the need, however, to extend the impact of the lower rates to the wider community to try to avert the current slowdown becoming any worse.

"We will do everything we can, while still acting responsibly, to help our customers get through these current challenges," Mr Fahour said yesterday.

The decisions by NAB and ANZ will put increasing pressure on the other two big banks, Commonwealth and Westpac, which are expected to push through matching reductions in the next few days. A spokesman for the Commonwealth said its rates were under review but that the country's largest lender would do what it thought necessary to remain competitive, a sentiment matched by Westpac.

SMH

© 2008 Newcastle Herald

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