THE Commonwealth Bank pledged to release up $3.6 billion in cash to households by cutting home loan rates, as survey shows 5.2 million Australians are unprepared for sudden job loss and 26% have less than $100 in savings.
In response to the Reserve Bank reducing the official cash rate to 0.25%, Australia’s largest lender announced a number of changes including:
- a 100 bps interest rate reduction for all existing cash-linked small business loans
- 70 bps interest rate reduction in one, two and three year fixed home loan rates for owner occupiers paying principal and interest to 2.29% p.a.
- 60 bps increase in 12-month term deposits to 1.70% p.a.
However, the bank will not pass on the latest 0.25% cut and the variable rate remains unchanged.
Commonwealth Bank CEO Matt Comyn said the changes to home loan repayments will release up to $3.6 billion in cash for Australian households.
“Following today’s reduction in the official cash rate by 25bps we are taking deliberate steps to further support parts of the economy most in need. In particular, we want to ensure that we help keep small businesses open so that they can keep Australians employed.
“We are strongly supportive of the RBA’s new term funding facility. We intend to participate in this scheme to the fullest extent possible to access long term funding at highly attractive rates to help support Australian households and businesses at this time,” Comyn said.
Meanwhile a consumer survey found more than 5.2 million Australians say they are unprepared for sudden job loss.
The Finder’s Consumer Sentiment Tracker found 45% of Australians don’t think they could last a month off their savings if they lost their jobs tomorrow and 26% of Australians have less than $100 in savings. Nearly a third (29%) are struggling to pay their rent or mortgage, up from 25% in February.
Monash University economist Mark Crosby expects the second rate cut will keep Australia in working order.
“Businesses cannot function without a workforce while still paying rent and interest.
“The RBA and government need to do what it takes to get these costs closer to zero,” Crosby said.