Australia’s largest bank has responded to the rate cut in a way that has surprised many, by raising rates on term deposits, and not by a small amount. It’s great news for retirees seeking higher than expected rates on their cash, and perhaps signals a change in attitude to the older generation and their money. Will the other banks follow suit?
The Commonwealth Bank has decided and announced two big moves today. Firstly, they have decided to only pass on part of the Tuesday rate cut, of just 0.20% to home loan customers, taking their standard variable rate to 5.45% after the Reserve Bank cut of 0.25%. And secondly, they have decided to raise interest rates on their 8 month term deposits by an extraordinary 0.55%, taking the interest rate to 3.05% and lifted the interest rate marginally on their bonus savings accounts by 0.05%.
Governor Glenn Stevens said that the Reserve Bank Interest Rate was cut chiefly due to weakness in business capital expenditure in both the mining and non-mining sector but many are optimistic that this will be the last cut.
“Provided that the federal budget rebuilds confidence, provided that the domestic economy continues to lift and provided that the global economy brightens, then the Reserve Bank shouldn’t need to do more this cycle in stimulating the economy,” Commsec Chief Economist Craig James said.
CBA’s group executive for retail banking, Matt Comyn, said to Fairfax Media the bank had considered the needs of deposit customers as well as borrowers in its decision. “Lifting the rates for our deposit customers at a time when the cash rate is decreasing recognises the importance of savings income, particularly for retirees and young people.”
It is a contrast to the other of the four banks, ANZ who today announced only that they would pass on the rate cut in full to homeowners. Westpac and NAB had at the time of writing not yet announced their rates position.
Do you think we’ll start to see other institutions move against the interest rate trend in an effort to shift the retiree’s dollars through their doors as the battle for the silver and superannuation dollar heats up?