UPDATE 1-Australian banks cut mortgage rates by 0.25 pct
(Adds analyst comments, details)
SYDNEY, Sept 2 (Reuters) - Australia's top banks cut variable mortgage rates on Tuesday in response to the central bank's decision to cut official rates, in what analysts said was an affordable and surprisingly quick move.
As widely expected, the Reserve Bank of Australia (RBA) cut its benchmark interest rate by 25 basis points to 7.00 percent, to stimulate the economy, and said financial conditions were quite tight. It was the first rate cut in seven years. For details, see [nSYD48228].
Australian banks have been under intense political pressure to pass on any rate cuts by the RBA, with Treasurer Wayne Swan calling on them to follow any central bank move.
National Australia Bank Ltd (NAB.AX), the biggest bank, Commonwealth Bank (CBA.AX), the No. 2, Australia and New Zealand Banking Group (ANZ.AX), the third largest and No. 4 Westpac Banking Corp (WBC.AX), said they were cutting their standard variable home loan rates by 0.25 percent.
"I thought it was surprising that they reacted that fast and almost simultaneously. That was interesting. Everyone had decided that they could afford to pass on the rate cut, and the risk of being the odd one out, of being isolated, was too big," said Brett Le Mesurier, analyst at Wilsom HTM.
The banks have pointed to higher funding costs to justify recent interest rate increases, as access to credit has become increasingly tight and expensive amid the global credit crunch. The top four banks rely heavily on wholesale funding market.
"The fact that all banks announced the cuts reflects the political pressure they are under from the government, and also from the Reserve Bank itself. Also, they are under competitive pressure," said Shane Oliver, head of investment strategy with AMP Capital Investors.
"What they have done is fair, to have not done would have been seen as profiteering."
In an unusual move earlier this year, the banks raised home loan rates out of step with a central bank rate move. (Reporting by Mette Fraende and Denny Thomas)
