Industry gets help with margins
Banks have more scope to repair their margins after the Reserve Bank of Australia said it will cut the target for the cash rate by 50 basis points to 3.75 per cent.In order to secure a meaningful cut in lending rates consistent with the easing in monetary policy, the RBA said, in a statement, that "the board judged it desirable that financial conditions now be easier than those which had prevailed in December."It said the cut of half a percentage point in the cash rate was "in this instance… judged to be necessary in order to deliver the appropriate level of borrowing rates."The number of smaller lenders seeking to make a virtue of a close link between the main home loan rate and the RBA's cash rate has been dwindling.One of those that only recently shed the habit - Bank of Queensland - said last night that it will cut its variable home loan rate by 35 basis points to 7.11 per cent from May 11.BOQ said in a statement that "increased competition in retail term deposits continues to put upward pressure on the bank's cost of funds."The RBA made one comment on funding cost trends in its statement, noting that "at the margin, wholesale funding costs have declined over recent months, though they remain higher, relative to benchmark rates, than in mid-2011."Changes to bank pricing following this RBA decision may be more drawn out than is usually the case.ANZ's new policy is to announce rate changes on the second Friday of each month, which means any bank taking the view that it prefers to wait for ANZ's pricing will have to wait another nine days for that lead.