A reduction of 0.13% p.a. will be passed on to all variable CUA home loan products, excluding CUA Rate Breaker*.
"CUA’s decision has carefully reflected the interests of our members. CUA is distributing the rate changes as fairly and equitably as we can across lending and deposits, while ensuring every CUA member with a variable rate home loan will benefit," CEO Rob Goudswaard said.
"We are in a challenging economic environment - this is the third reduction in the RBA cash rate since June. Market forces, rather than the RBA’s official cash rate, are the primary driver of CUA’s funding costs and it is becoming more difficult to absorb the impact of passing on the full rate cut, while balancing the needs of all our members. But even so, our rates on lending and deposits will remain some of the most competitive in the market after these changes."
While CUA will make some changes to rates on interest earning accounts, 70 per cent of savings accounts will be buffered from the full impact of the fall in the RBA cash rate.
"Although rate reductions benefit borrowers with a home loan, unfortunately they are eroding the returns for those people who rely on savings like retirees and pensioners. There is also a limit to how much of the rate cut we can offset by reducing rates on savings accounts, given a large portion of our deposits are held in transaction accounts where interest rates are already close to zero," Mr Goudswaard said.
Last week, CUA announced that the full-year cash profit for FY19 was down 9.7 per cent on the previous year, citing the challenging economic environment and record low cash rate as factors which were putting pressure on CUA’s already tight margins.
"CUA’s lending margins are already among the tightest in the market and reductions in the official cash rate adversely impact our profitability," Mr Goudswaard said.
"As a member-owned organisation, we need to generate sustainable profits, which provide our only source of core capital. This capital allows us to continue delivering competitively priced products to current and future members. It also means we can continue to invest in service improvements and digital banking initiatives that will allow us to keep pace with the changing banking needs and expectations of our members."
Borrowers with a CUA variable rate home loan will be notified via mail in the coming weeks of the rate change and new repayment amounts applicable to their loan. To discuss the changes, members are encouraged to contact their personal banker via iM CUA, visit their nearest CUA branch or call 133 282.
The new variable home loan rates will be effective from 29 October 2019 for all variable loan products, excluding CUA Rate Breaker*.
* CUA Rate Breaker members will receive rate reductions in line with the relevant terms and conditions for that product.