Australia’s largest banks dropped their benchmark mortgages rates to the lowest since 2009 after the central bank cut its key rate to a record, potentially providing a lift to Prime Minister Kevin Rudd’s re-election bid.
Westpac Banking Corp. cut its rate by 28 basis points to 5.98 percent, passing on more than the central bank’s 25 basis-point drop. Commonwealth Bank of Australia and National Australia Bank Ltd. matched the Reserve Bank of Australia’s cut, the lenders said in e-mailed statements. Australia and New Zealand Banking Group Ltd. will decide on the second Friday of the month, in line with its policy started in December 2011.
Rudd, who called an election for Sept. 7, may benefit politically from the rate reduction in a nation where about 90 percent of mortgagees have variable-rate loans. Lower interest rates boosted home prices by the most in more than three years in the second quarter, statistics bureau data showed today.
“The reduction will boost soft demand for home loans,” David Ellis, a Sydney-based analyst for Morningstar Inc. said. “With deposit rates falling as well, investors will look for alternative higher yielding assets.”
Home prices across the nation’s eight biggest cities rose 2.4 percent in the three months to June 30 after a revised 0.8 percent increase in the first three months of the year, according to the statistics bureau. The gain was the biggest since the first quarter of 2010, and beat the median estimate of 15 economists surveyed for a 1 percent increase.
Outstanding mortgages grew 4.6 percent in the year to June 30, up from an unprecedented 4.4 percent in the first three months of the year, data compiled by the central bank show.
Westpac has “seen increasing signs of buyers returning to the housing market” and the latest interest rate reduction will support both new and existing customers, Jason Yetton, group executive of the bank’s retail and business bank said in today’s statement.
The Reserve Bank of Australia reduced the overnight cash-rate target by a quarter percentage point to 2.5 percent, it said in a statement in Sydney today, as forecast by 26 of 27 economists surveyed by Bloomberg News.
Westpac ended 0.4 percent lower at A$31.24, CBA fell 0.3 percent, NAB slipped 0.1 percent and ANZ dropped 0.2 percent in Sydney trading.