Two Australian lenders cut interest rates on their mortgage products, defying the current upward trajectory in interest rates.
CUA, Australia's largest credit union reduced its standard variable rate by 0.25% to 6.37% effective 19 March 2010. This new rate is 0.64% lower than Westpac's 7.01% and follows the defiant move by AMP.
Earlier this week, AMP said it will slash interest rate on its introductory loan by 0.45% to 5.94% and further cut its basic variable mortgage rate by 0.22% to 6.27%. AMP has already slashed its basic variable rate by 0.10% as early as 21 February. The new rates, which come into effect 22 March 2010, will be among the most competitive in the market.
"AMP's decision provides more evidence that our investment in RMBS is enabling smaller lenders to lend at competitive mortgage rates," said Wayne Swan, federal treasurer of Australia. "This is helping to put more competitive pressure on the big banks and downward pressure on mortgage rates over time - a really important objective."
CUA's Chief Executive Officer Chris Whitehead said the cutting of mortgage interest rates was in response to recent comments by Treasury Secretary, Ken Henry, stating that competition in the Australian banking sector had diminished.
"We agree with the Treasury Secretary that the banking sector has become more concentrated over the last few years. There is a crying need for more competition and we are taking an active step in driving that competition," Whitehead said.
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