The big four ASX bank shares dipped then flipped after the Reserve Bank announced a second 0.25% interest rate cut for the year.
At 2:30pm AEST, the benchmark S&P/ASX 200 Index (ASX: XJO) lifted on news of the decision.
A rate cut means lower costs for businesses and financial relief for consumers.
The big four ASX bank shares began a short-term dive at 2:30pm, followed by varying degrees of recovery throughout the afternoon.
All four of the major banks announced they would pass the cut on in full.
The ASX bank shares likely fell because lower rates may lead to compressed margins, along with higher competition for home loans.
Macquarie says a shift in earnings is likely ahead for the ASX bank shares because of these two factors.
This may squeeze dividends, with Daniel Moore from Investors Mutual describing them as 'very stretched for all the banks except CBA'.
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ASX 200 bank shares dip then flip as lenders announce cuts
National Australia Bank Ltd (ASX: NAB) shares are currently $37.34 apiece, up 1.36% for the day so far.
NAB announced it would reduce its standard variable home loan interest rates by 0.25% per annum (pa) from May 30.
NAB does not automatically reduce repayments when interest rates change.
Customers have to opt in to lower their repayment amounts.
Group Executive, Personal Bank, Ana Marinkovic said:
More than 95% of NAB customers opted to keep their repayments at the same level when rates last decreased, choosing to pay down their home loan quicker and save more in the long term.
Commonwealth Bank of Australia (ASX: CBA) shares are $171.82, up 0.27%.
CBA announced it would also lower home loan variable interest rates by 0.25%, effective 30 May.
CBA's Group Executive, Retail Banking Services, Angus Sullivan, said:
Today's announcement of a 0.25% p.a. rate cut will help to deliver a monthly saving of approximately $80 for home loan customers making principal and interest repayments on an average loan size of $500,000.
After two rate cuts many home loan customers will start to see a more meaningful change month to month.
ANZ Group Holdings Ltd (ASX: ANZ) shares are $28.96, up 1.97%.
ANZ also announced it will cut variable home loan interest rates by 0.25%, effective 30 May.
Westpac Banking Corp (ASX: WBC) shares are $31.62, up 0.8%.
Westpac will cut home loan variable interest rates by 0.25% for new and existing customers from 3 June.
In a statement, Westpac said this year's two rate cuts combined meant a $178 per month saving for customers with a $500,000 home loan on principal and interest terms.
Westpac has also cut its savings account interest rates as follows:
- Westpac Life total variable rate with bonus interest will decrease by 0.25% pa to 4.5% pa, effective 30 May
- Westpac eSaver total variable rate with a 5-month introductory rate will decrease by 0.25% pa to 4.5% pa for new customers applying online, effective 30 May
