Westpac and Commonwealth Bank Cut Fixed Rates

Submitted by Sharemarket News on 10 August, 2011 - 10:41

Commonwealth Bank (ASX:CBA) and Westpac (ASX:WBC) yesterday slashed their rates for fixed home loans after predicting that the Reserve Bank's next rate will go down.

CBA dropped 25-60 basis points to 6.59-6.99 percent from its one to five years fixed rates effective Friday, while Westpac cut 20 basis points to 6.79 percent from its Premier Advantage Package rate for its three year fixed rate loan, effective immediately.

The rate cuts reflect the shaky global economic sentiment, fuelled by the European debt problems and the downgraded US credit rating. Ross McEwan, head of retail banking services at Commonwealth Bank, said fixed home loans gave borrowers "peace of mind."

The fixed term rates are well below the average discount variable rates which depend on the Reserve Bank's official cash rate.

The RBA boosted rates by 25 basis points in November, but has maintained the official cash rate at 4.75 percent. The bank anticipates a rate spike to avert inflation from the boom in the mining sector, but investors are betting on a drop in rates.

Many economists think the RBA will leave rates unchanged until global economic conditions grow clearer. Reserve Bank Governor Glenn Stevens said the rates are on hold due to uncertain financial markets worldwide.