UPDATE 2.30pm: National Australia, Commmonwealth and Westpac banks have cut their interest rates, but by less than the latest reduction by the Reserve Bank.
NAB and Commonwealth Bank wil cut their rate by 20 basis points while Westpac will reduce its by 18 basis points.
Westpac’s move brings its standard variable home loan rate to 6.71 per cent.
The new rate takes effect from October 15, 2012, Westpac said today.
"In coming to this decision we have sought to balance the needs of our mortgage customers with those of our millions of savers, particularly retirees who depend on the income from their deposit accounts,” Westpac group executive retail and business banking Jason Yetton said.
"While we have seen some easing in the wholesale market in recent months, our overall costs including the price of deposits remain historically very high."
The Reserve Bank of Australia lowered the cash rate by 25 basis points to 3.25 per cent on Tuesday.
NAB will cut its standard variable interest rate on home loans to 6.58 per cent, saving $50 per month on repayments an average $300,000 mortgage, it said.
The NAB cut comes into effect on October 8.
Commonwealth Bank today said it wouild reduce its variable rate on home loans to 6.6 per cent on October 12.
While home owners are likely to welcome reduced payments on their mortgages, both banking giants failed to match the 25 basis point cut the Reserve Bank made.
CBA said it needed to balance the needs of 1.8 million home loan borrowers with those of its 11 million deposit customers and shareholders.
"One significant factor impacting this balancing of needs has been the increase in the cost of deposits noted in the Reserve Bank of Australia’s most recent Financial Stability Review,” CBA said in a statement.
"This increase, benefiting depositors, has resulted from increased competition for deposits, as Australian banks reduce their reliance on wholesale funding."
NAB's executive of personal banking Lisa Gray said the bank had sought to strike a balance between offering the lowest variable rates of the major banks and its obligations to ensure Australian banks are safe and secure.
"Banks obtain funds for lending from deposits and from wholesale funding markets," she said in a statement.
"Around the world, banking regulators require banks to hold more stable forms of funding, like deposits, to reduce risk in the banking sector.
"The increased competition for deposits is pushing up costs, making it more expensive to fund our lending.
"The decision we have taken today means we can continue to offer competitive deposit rates while delivering on our pledge to have the lowest SVR (standard variable rate) of the major banks for 2012."
ANZ is yet to announce any change to its rates.