Relief as interest rates are cut for business and home borrowers

Business borrowers will finally get some relief from high interest rates after National Australia Bank announced it would cut its business lending rates by 0.2% from next Monday.

Business borrowers will finally get some relief from high interest rates after National Australia Bank announced it would cut its business lending rates by 0.2% from next Monday.

The bank will also cut its standard variable mortgage rate by 0.2% to 8.36% and will also lop 0.3% off some of its fixed loans. The move followed ANZ’s decision to cut its standard variable rate by 0.25% to 8.32% and Aussie Home Loan’s decision to drop its rate on variable home loans for first home buyers by 30 basis points to 7.79%.

But it is the NAB’s decision to cut business lending rates for businesses that will be cheered most loudly by entrepreneurs.

Peter Arnold from research firm Cannex says that since the RBA shocked the market with its 1% cut in official rates in early October, very few lenders have reduced their rates on business loans.

On top of this, it is clear that banks are retreating from business lending as the economy slows. Rapidly slowing sectors such as financial services, property and manufacturing appear to have been hit hardest by credit rationing.

On Friday, Federal Innovation Minister Kim Carr revealed new commercial loan commitments to the ailing manufacturing sector fell 44% in the three months to August, compared to the three months to August 2007.

“Credit is drying up. As if it wasn’t hard enough battling against a high dollar, high fuel prices, cut-throat competition, and changing consumer preferences,” Carr told an audience of car part industry leaders.

Let’s hope NAB’s business lending rate cuts put pressure on the other major banks and non-bank lenders, to lower their rates.

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