Interest rates – a letter from our CEO
As you would be aware, on Tuesday 2nd August, the Reserve Bank of Australia (RBA) reduced official interest rates by 0.25%. This took the official cash rate to 1.50% – the lowest official interest rate in Australia’s history.
We’ve had a number of enquiries as to how Queenslanders Credit Union will respond to the most recent cut. I can confirm that, at this stage, Queenslanders will not be changing any of our lending, savings or investment rates in response to the RBA decision.
In recent times, we have seen a significant increase in competition for retail deposits (savings and investments from personal customers). This competition, driven by new legislation that requires the big banks to source more of their funds for lending from retail deposits (rather than cheaper wholesale deposits) has led to lenders paying higher than expected rates to continue attracting funds – term deposits in particular.
Given Queenslanders attract all our funds for lending via retail deposits, this increased competition has had a significant effect on us. In the past, when we have passed on rate cuts to our borrowers, we have also been able to pass on a similar cut to our investors – helping to manage the impact on our profit of the rate change.
The recent changes in the deposit market have meant, however, that we have not been able to change our term deposit rates since March 2016 – despite cutting loan rates in May. Given deposit rates are not tipped to drop as a result of the August rate cut, we have made the difficult decision that we cannot continue to cut loan rates until some of the reduction can also be passed on to our depositors.
While we do not aim to make the same level of profits as our publicly listed competitors, we do need to make some profits to allow us to reinvest in the business. Despite not passing on a rate cut to our borrowers at this time, our lending products remain very competitive, as demonstrated by us recently being awarded 2016 Money Magazine Home Lender of the Year.
As always, if you would like to discuss this, or any other aspect of your membership, please feel free to contact us on 1800 753 377.
Regards
John Weier
Chief Executive Officer
