Everybody Wins In Interest Rate War
The Sun Herald
Saturday July 31, 1993
ALL-OUT war has erupted between Australian banks, with the National Australia Bank today announcing a 0.5 per cent cut in its main business lending rate, down to 9pc.
This latest reduction comes on top of last week's home loan rate cuts and big reductions in rates for personal loans, business and credit cards.
The battle of the titans to win the loyalty of Australian consumers ranges from special interest rate deals, to offering free desserts at restaurants for those who switch their credit cards.
This credit war has widened at the same time as chaos engulfs world finance markets, especially in Europe.
The Australian sharemarket is set to ignite tomorrow after the gold price rose $US9.20 to $US407 an ounce yesterday.
The Australian dollar surged US0.65c to US68.95c yesterday as investors sought safety from the turmoil in European currency markets which could see the collapse of the Exchange Rate Mechanism this weekend.
Ironically, a collapse could send interest rates tumbling across Europe, creating an environment for faster world economic recovery, said Citibank economist Grant Bailey.
With home loan rates cut to their lowest levels in 20 years, borrowers will save about $52 a month on an average $100,000 home loan after Friday's cuts.
The Commonwealth and Advance banks fired the first shots last week in what is looming as a savage, cut-throat war between the banks, slashing home loan rates from 9.5pc to 8.95pc ahead of the Reserve Bank's decision to cut official rates on Friday.
National and Westpac not only retaliated but took the fight to competitors, dropping their home loan rate from 9.5pc to 8.75pc.
The ANZ and St George were left standing as they simply matched the Commonwealth and Advance by cutting their rates from 9.5pc to 8.95pc.
But while most cuts come into effect around September 13, the Commonwealth has already signalled its intention to review home loan rates soon.
"We will be looking at our home loan rates following the Reserve Bank's easing and the decisions of our competitors," said Commonwealth spokesman Paul McCarthy. And with credit cards to be deregulated today, the Commonwealth could also cut credit card rates, he said.
State Consumer Affairs ministers on Friday signed a draft of the Uniform Consumer Credit Bill to encourage competition among banks, credit unions and building societies.
St George cut its Visa card rates from 16pc to 15pc on Friday; the ANZ's Bankcard and Visa card rates were cut 1pc to 19pc and its Mastercard rate fell from 16.25pc to 15.75pc.
Banks are now set to thrust upon credit card users a range of new products and services on cards to attract new customers, including restaurant offers, travel discounts, insurance deals and extended product warranties from today.
In personal lending, the National Bank late last week slashed the rate on unsecured personal loans from 16pc to 12pc, while the ANZ shifted the fight to the business arena.
The latest slide in interest rates could boost Sydney property prices 5-10pc in the next three months, according to Raine & Horne chairman, Max Raine.
Meanwhile, the National Australia Bank will cut business lending rates tomorrow following last week's reduction in official interest rates.
The bank's benchmark lending indicator rate for major corporate borrowers will be slashed from 9.5pc to 9pc on Monday while the Base indicator rate for business lending will be cut from 9.7pc to 9.2pc from August 16.
The ANZ bank dropped its key rate for big business customers to 9pc and the rate for small businesses to 9.25pc late last week.
The move to cut business rates follows calls from Federal Treasurer John Dawkins and the Governor of the Reserve Bank, Bernie Fraser, for financial institutions to pass on the benefits of lower official interest rates to business.
David Taylor, chief executive of State Chamber of Commerce said yesterday it was "absolutely vital that we saw the competitive interest rate war start shifting from the home loan and consumer credit market to the business sector".
"But while the latest lowering of business rates will be a fillip to all businesses, the cuts in themselves will not generate the growth in business investment that the Federal Government is expecting," Mr Taylor said.
Variable Credit Unsecured
BANK Home Loan Cards Personal Loans
ANZ 8.95% B/card 19% 12.56 - 14.89%
Visa 19%
M/card 15.75%
Commonwealth 8.95% B/card 18.25% 13.0 - 16.25%
Visa 18.25%
M/card 18.25%
National 8.75% B/card 18.85% 12%
Visa 18.85%
M/card 18.85%
St George 8.95% Visa 15% 12.5% - 13.5%
Westpac 8.75% B/card 18.9% 13%
Visa 18.9%
M/card 15.9%
Credit card war: P 43
Currency chaos: P 44
© 1993 The Sun Herald
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