Australia's NAB joins ANZ in cutting mortgage rate

SYDNEY Oct 20 (Reuters) - National Australia Bank (NAB.AX) (NAB) has followed rival Australia and New Zealand Banking Group (ANZ.AX) in cutting its main mortgage rate, in a move seen likely to ease pressure on the central bank to make deep rate cut.

NAB's move, announced on Sunday, has raised expectations that the other three major domestic banks -- Commonwealth Bank (CBA.AX), Westpac (WBC.AX) and St George SGB.AX -- will follow suit ahead of the central bank's next policy meeting on Nov. 4.

NAB, the country's largest lender, and ANZ cut their standard variable mortgage rates by 0.20 percent and 0.25 percent, respectively, after the government guaranteed their deposits and wholesale funding in response to the global financial crisis.

Both banks have now fully passed on the central bank's shock 1 percentage point rate cut of early this month.

"That (the government guarantee) has improved their funding position, so I think the quid pro quo is they start to respond by cutting interest rates," said Rohan Walsh, investment manager at Karara Capital.

"It would be quite negative from a customer perspective if they didn't," he added, noting that credit spreads had improved, and margins were looking better.

The RBA is expected to cut rates again next month, but Australian bill futures YBAc1 tumbled on Monday on speculation the RBA might not cut as aggressively as many investors expect.

For a story on the central bank's next rate decision, please click on [ID:nSYD409790]. (Reporting by Mette Fraende; Editing by James Thornhill and Mark Bendeich)