We'll pass on rate cut, NAB says

[Shadow]

NAB is the first to blink!

http://business.smh.com.au/business/well-pass-on-rate-cut-nab-says-20080821-3z5c.html

We'll pass on rate cut, NAB says

National Australia Bank became the first of the major banks to break ranks over the cost of home loan funding with a promise today to pass on the full effects of any forthcoming interest rate cut by the Reserve Bank.

In a move which will put immense pressure on the rest of the Big Four and the largest of the second tier banks, St George, to follow suit, NAB took the highly unusual step of declaring it will reduce its top line mortgage by a quarter of a one percentage if the RBA moves downward as expected next month.

The RBA has sent strong signals to the market that rates will be cut by 0.25% to 7% when its board meets in early September to consider the cost of borrowing.

NAB shares fell as much as 1%, or 25 cents, to $23.85 in early trade.

Increasing concerns about the state of the domestic economy, growth of which is slowing sharply, has prompted the RBA to flag that it will take action on interest rates after successive rises aimed at reining in inflation.

Rates, though, have also been rising as a direct consequence of the global credit crisis which has pushed up the cost of funding for the banks when they borrow from international debt markets to meet the lending demand from consumers.

Home loan rates have gone up by an additional 50 and 60 basis points - 0.5 to 0.6% - since January over and above the rises in official cash rates sanctioned by the RBA as the banking industry has sought to recover its higher financing costs.

The increases have also applied to a whole range of other loans and methods of borrowing including credit cards, car loans and credit required by businesses to underpin their operations.

The standard variable mortgage rate now stands at an average of around 9.6% which has fuelled accusations by consumer groups and even the Federal Government and the Reserve itself that the banks are cashing in.

In recent weeks, the Prime Minister Kevin Rudd, the Treasurer, Wayne Swan, and senior RBA figures have all pressed the leading banks to cut their top line rates in line with any reduction by the Reserve.

However, whilst sympathetic to the calls, the chief executives of the major five banks - Commonwealth, NAB, ANZ, Westpac and St George, have all said it was too early to give such a guarantee as they would have to consider a whole range of issues including their own financing costs before deciding whether to pass on a 0.25% reduction in full.

NAB, though, today became the first to buckle by saying it would be in a position to pass on any cut that might soon come. It had committed to the decision because of an improvement in financing costs in short term money markets which had earlier this year blown out and helped push up interest rates.

Its standard variable mortgage rate will drop to 9.36% if the RBA does move.

''While we continue to see volatility in international markets and increases in the average cost of long term funding, we have experienced some short term funding relief which we are keen to pass on to our customers,'' said Ahmed Fahour, chief executive of NAB Australia, the group's domestic banking business which is responsible for fixing its home loan costs.

However, Mr Fahour indicated the guarantee would probably only apply to the first cut and that the bank would have to consider the impact of the funding pressures on it before passing on any possible further reductions.

''While I am pleased to make today's undertaking, our medium and long term funding and our retail deposit base represent the greatest proportion of our funding costs and the average cost of these sources of funding continue to increase,'' he added.

 

[willair]

NAB is the first to blink!

http://business.smh.com.au/business/well-pass-on-rate-cut-nab-says-20080821-3z5c.html

When you look at the share price,it just about says it all willair..
23.500-2.49%23.50023.52024.04024.09023.4303,951,494

 

[oracle]

Nice...Although I don't have any loans with NAB, the move would certainly put pressure on the other lenders to follow suit.

I guess the Reserver bank must be thinking our meeting is going to be just a formality. Everyone already knows the outcome.

Cheers,
Oracle.

 

[kissfan]

Hehe. When I first saw the title of the thread, I interpreted it though NAB were saying "we'll PASS on rate cut" as in we'll give it a miss.

Regards
Marty

 

[josko]

NOTE: It will not be to existing borrowers. Only to new borrowers.

Regards Jo

 

[boomtown]

NOTE: It will not be to existing borrowers. Only to new borrowers.

Regards Jo

Thats a bit of a nasty trick.

 

[lizzie]

NOTE: It will not be to existing borrowers. Only to new borrowers.

nasty - but where did you read that?

the article did say that they were committed to passing on the first rate cut, but would have to reconsider any further cuts thereafter.

 

[warmed_cockles]

NOTE: It will not be to existing borrowers. Only to new borrowers.

Regards Jo

Surely that's not right?

 

[Peter_Tersteeg]

Somewhere one of the second tier lenders like ING will pass on all rate cuts. All of the other lenders will follow, especially the big banks. They've enjoyed getting back some market share recently and they'll want to protect that.

 

[dave99]

If they don't pass it on to you, switch lenders. Enough people leave - they'll drop it for existing customers too.

 

[rogue]

http://www.businessspectator.com.au/bs.nsf/Article/NAB-pledges-to-match-RBA-cuts-HPVD9?OpenDocument

NAB signals rate cut

By a staff reporter, with AAP

National Australia Bank Ltd will come to the party and pass on in full a 25 basis point rate cut if the Reserve Bank of Australia (RBA) trims the official cash rate by that amount.

NAB said on Thursday it would lower its standard variable interest rate by 0.25 per cent to 9.36 per cent per annum, if the RBA cuts the official cash rate by 0.25 per cent at is board meeting in September.

"The Reserve Bank is sending out a signal and nothing gives me more pleasure than to follow suit," the bank's Australian chief executive Ahmed Fahour said.

Mr Fahour said an average mortgage lender with a $200,000 loan could expect to save $11 a week, but he warned that the long term borrowing costs would continue to rise.

"The RBA rate is no longer an indicator of the bank's costs of funds... and it's the banks that set the mortgage rate," he said.

The pledge follows intense debate this month over whether or not Australia's big banks would be willing to pass on in full a rate cut the RBA now seems likely to make.

Asked if the central bank cut 50 basis points next month, Mr Fahour said the bank would consider the market reaction, but would not commit to a higher cut of 0.25 per cent.

Mr Fahour said NAB had been reviewing the cost of wholesale funding closely and, based on current short term funding costs, the bank would be in a position to pass on a reduction in interest rates to its customers.

"While we continue to see volatility in international markets and increases in the average cost of long term funding, we have experienced some short term funding relief which we are keen to pass on to our customers," Mr Fahour said.

"While I am pleased to make today's undertaking, our medium and long term funding and our retail deposit base represent the greatest proportion of our funding costs and the average cost of these sources of funding continue to increase.

"The recent fall in short term funding costs provides an opportunity to undertake to move rates in line with the RBA decision but future interest rate decisions will need to reflect an assessment of all the cost of funding factors.

"All Australian banks are reliant on offshore funding and increases in the average cost of long term funding are likely to be with us for some time.

"Therefore any consideration that the Federal Government can give to enhance the attractiveness of retail bank deposits will help reduce overall funding costs and assist in lowering mortgages rates."

Separately, when asked about the bank's exposure to Babcock and Brown, Mr Fahour refused to comment.

"We don't comment on customers of the bank and so forth... but if it was substantial the ASX would know," he said.

 

[Shadow]

Give it up Rogue... rates are coming down... you might as well just accept it.

Time to say goodbye to that crash... it's been put on hold!

Shadow.

 

[Aaron Sice]

If they don't pass it on to you, switch lenders. Enough people leave - they'll drop it for existing customers too.

what planet do you live on? i'd like a economy seat to wherever you are.

look at MCQ, RHG, SUN - none of them have lowered their interest rates and they still attract customers.

like the banks give a flying f__k if 100 odd customers leave....!

 

[josko]

what planet do you live on? i'd like a economy seat to wherever you are.

look at MCQ, RHG, SUN - none of them have lowered their interest rates and they still attract customers.

like the banks give a flying f__k if 100 odd customers leave....!

LOL!

Originally Posted by josko
NOTE: It will not be to existing borrowers. Only to new borrowers.

1. Judging by past history.
2. I am taking the statement by NAB literally.

No where does it say that the NAB will pass it on to existing borrowers.

I do, however, hope that I am wrong. Apparently, you can ring the bank and ask them to lower the rates. LOL AGAIN!

Regards Jo

 

[Belu]

if they lower the variable and you are on variable how is it not passed on?

 

[josko]

if they lower the variable and you are on variable how is it not passed on?

In the same way, that if you take out a loan with a variable IR of 8.5% and then the next day, the bank introduces a new product with a lower interest rate of 8.25% ....... your new loan does not drop. You're stuck with your first IR.

Regards Jo

 

[Belu]

but its variable? if the product is the same i dont see why it doesnt get passed on?

 

[Aaron Sice]

but its variable? if the product is the same i dont see why it doesnt get passed on?

because banks are (and have always been!) allowed to vary their interest rate independant of the RBA.

just because for the last 40 odd years they have kept a standard 2-3% margin on the standard cash rate and moved along with the cash rate accordingly - the serious erosion of profit margins and bad exposure to poor investments choices during the debt euphoria has meant that they can, and will, move their variable rate up independant of the RBA.

if the RBA lower rates, it will be to increase the margin available to major banks - the banks have no incentive or need to pass on a rate cut. all it does is increase the banks profit margin and stop them from folding like IndyMac or FNM or FMC.

got to love a cartel. i still say the RBA is a wealth confiscation vehicle.

 

[TheAnalyst]

LOL!



1. Judging by past history.
2. I am taking the statement by NAB literally.

No where does it say that the NAB will pass it on to existing borrowers.

I do, however, hope that I am wrong. Apparently, you can ring the bank and ask them to lower the rates. LOL AGAIN!

Regards Jo

Mate, you do not need them to say that. It is simple the all varables will be cut accordingly -- apart from fixed. It is a common sense. When they raised the rates, they did not say we only do for those new applications. I can guaranntee that.

 

[TheAnalyst]

what planet do you live on? i'd like a economy seat to wherever you are.

look at MCQ, RHG, SUN - none of them have lowered their interest rates and they still attract customers.

like the banks give a flying f__k if 100 odd customers leave....!

I agree with you. We live in a highly protected society. Such as, doctors, they are guaranteed for a high income. The competion in finance, petrol, retail are all controled by few big companies. I often heard banks around the world wen bankrupt but never heard from Australia. The only suffers are the ordinaries. The government is so week that they can not do anything. Nearly a year, we heard W swan and K Rudd talking about retail, petrol, bank... what happens.... nothing