* CBA cuts 5-year fixed home loans to lowest ever
* NAB cuts home loan rates to lowest in 20 years
* Move driven by falling funding costs for banks
By Swati Pandey
SYDNEY, July 23 Two of Australia's biggest banks
cut their fixed-rate home loans on Wednesday in a move analysts
said reflected lower borrowing costs and expectations that the
Reserve Bank of Australia will keep rates at record lows.
Commonwealth Bank of Australia, the country's
biggest lender by market value, said it will offer a 5-year
fixed-rate home loan at 4.99 percent, its lowest ever.
National Australia Bank quickly matched the rate,
its lowest in 20 years, cutting its 5-year rate by as much as 70
basis points, effective Friday. NAB has also cut three and four
year fixed rates, it said.
Other banks are also expected to follow suit.
The move was driven by lower borrowing costs for banks and
was unlikely to drive near record-low lending margins down
further, analysts said.
Australia's five-year swap rate, an indicator
of long-term funding cost for banks, last week hit its lowest
since late 2012. It has fallen nearly 60 basis points since
April. Its mid-value was 3.1375 percent at around 0700 GMT.
"The ability of banks to raise funds cheaply is improving
and that means they can pass it on to borrowers," said David
Sportswood, banking analyst with Shaw Stockbroking.
Australia's residential property market has been enjoying
rising prices and a revival in activity after a period of
stagnation, thanks largely to record-low interest rates.
The Reserve Bank of Australia has kept rates steady at a 2.5
percent after last easing in August 2013. Most economists expect
rates to remain on hold for at least the rest of the year.
Mortgage lending is the biggest asset class and profit
contributor for Australia's "Big Four" banks - CBA, NAB, Westpac
and Australia and New Zealand Banking Group.
Together, the four write as much as 90 percent of the
nation's home loans.
A government-backed review of the country's financial system
last week said an increase in Australian housing debt since 1997
and banks' concentrated exposure to mortgages was a significant
source of systemic risk.
The review invited submissions on whether the big banks
should set aside more capital against mortgages and sought
further information on measures to mitigate risks to the
financial system and the economy from the housing market.
(Editing by Eric Meijer)