The National Australia Bank has declared war on Westpac, opening up the biggest-ever mortgage rate gap between the major banks in a lunge for Westpac's customers.
NAB's decision to lift its already-lower standard variable mortgage rate by just 0.25 points in contrast to Westpac's 0.45 means that from this morning NAB customers will pay a standard variable rate of 6.49 per cent compared to Westpac's 6.76 per cent.
Customers enjoying discounts will pay 5.79 per cent compared to Westpac's 6.06 per cent.
The saving on a $300,000 mortgage amounts to $51 per month; on a $500,000 mortgage to $84 per month.
Asked how long it had been since such a wide gap had opened between the big Australian banks NAB personal banking executive Lisa Gray said her records did not go back that far...
"It appears to be so long ago that non-one can find the exact period of time," she told the Herald, "But it would be decades ago, if there was such a difference."
Treasurer Wayne Swan hailed the new competion as a victory for consumers and the community.
"Families looking to take out a mortgage will obviously take close notice," he said.
"The contrast with the behaviour of Westpac earlier this week could not be more stark."
Westpac pushed up its rates 0.45 percentage points Tuesday - almost double the Reserve Bank's 0.25 point hike - and Wednesday set out the case for other banks to do the same, its retail chief Peter Hanlon declaring on Melbourne radio that "all of the banks are in the same boat".
NAB executive Lisa Gray said yesterday each bank had different finances and invited Westpac customers to switch.
"I call on Westpac customers who are not happy with their actions earlier this week to come and have a look at NAB, because we can offer them a better deal," she said.
"We led the industry by abolishing overdrawn fees on personal transaction and savings accounts and by getting rid of over limit fees on NAB credit cards. We also led the industry by abolishing the $4 and $5 monthly account service fees on our most popular transaction accounts."
"We have offered the cheapest standard variable interest rate amongst the major banks for the past six months and our new rate is likely to remain unbeaten amongst the major banks."
RMIT marketing professor Michael Beverland said Westpac had made a mistake and destroyed whatever advantage it had had in the battle for customer's hearts.
"The banks have been talking in emotional language, saying we're here for you, we want to abe a partner in your life, they have moved away from being rock solid brands to being emotional brands."
"That makes what Westpac did really quite contradictory. They went completely against that and reinforced what most people thought about banks before. It was a critical event."
Westpac's executive Gail Kelly remained unavailable for comment for the third successive day since the 0.45 point hike, despite fronting a campaign earlier in the year to explain funding costs.
Her retail head Peter Hanlon pointed out that Westpac's whole-owned subsidiaries St George and Bank SA had yet to announce their interest rate moves and may well decide not to follow Westpac's lead.
"They make their own decisions," he said. "They report individually to Gail Kelly."
The NAB move makes it likely that no other lenders will follow Westpac, not even the ones it owns.
The ANZ and Commonwealth Banks have yet to declare their hands.
Asked whether Westpac's existing customers would make the effort to switch or just accept the higher mortgage repayments Professor Beverland said he thought they would at least hav a hard think.
"They'll look at what's involved in switching. Can we have a conversation with the bank manager about the interest rates and the difference. It will force them to look, because this is quite new."
Published in today's SMH and Age
Photo: The Punch
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