State Bank Slashes Capped Home Rates
Sydney Morning Herald
Friday July 31, 1992
The State Bank of NSW has cut its one-year capped home loan rate below 7 per cent for the first time in almost 20 years, but other banks were cautious about following suit immediately.
The bank lowered its one-year capped rate from 8.5 per cent to 6.95 per cent, the lowest rate since September 1973. The rate, available from Monday, is almost 3 per cent below its standard variable home loan rate of 9.9 per cent.
A bank spokesman, Mr Rick Turner, said the bank was looking for a greater share of the NSW home lending market and saw "some chance" of a pick-up in economic activity in spring. "This is when the real estate market wakes up."
Mr Turner stressed that the move to cut the rate was not a gimmick. He said the bank was keen to win market share and received a big boost to its home lending book the last time it cut its rate so aggressively almost 18 months ago.
The size of the cut, announced late last night, caught the other banks by surprise. Most said they would consider their response over the weekend.
The State Bank said an owner-occupier taking out a 25-year loan at the new rate would save about $200 a month in repayments on a $100,000 mortgage, or$2,400 in the first year.
The bank now offers the lowest short-term capped home loan in NSW. New loans under the offer carry a flat establishment fee of $600 in NSW and the ACT.
The bank said the rate was designed to attract new home buyers, renovators and those people looking to refinance loans with other financial institutions
Mr Turner said changes to the variable home loan rate were dependent on the make-up of the Federal Budget to be brought down later this month and the pace of recovery in the world economy.
Talk of another cut in official rates gained credence during the week with the announcement of a 0.3 per cent fall in consumer prices in the June quarter, which helped push Australia's inflation rate to its lowest level in 28 years.
Last week the National Australia Bank cut its three-month fixed home loan rate to 7.75 per cent and Citibank reduced its 12-month rate to 7.95 per cent
The other big home lenders - Advance, ANZ, Commonwealth, St George and Westpac - are offering rates of between 8.25 and 8.95 per cent for loans capped for periods of up to a year.
A spokesman for St George described the State Bank move as "pretty aggressive". He said NSW's biggest home lender would review its position in light of market rates although it was unlikely to presage a cut in all home loan products.
A Commonwealth Bank spokesman said the bank reviewed its rates all the time and would look at its position given what the State Bank had done. He said there was room for another cut in official rates of up to 0.5 per cent after the Budget.
The Commonwealth was looking at introducing a new three-year fixed loan and reducing its five-year rate, which, at 12 per cent, is well above the market.
The State Bank is estimated to be the third biggest home lender in NSW behind St George and the Commonwealth.
It is making a strong push for market share on all fronts. A fortnight ago it introduced special capped loans to small and medium-sized businesses at a base rate of about 7.9 per cent.
© 1992 Sydney Morning Herald