AUSTRALIA’S biggest rural lenders are reducing interest rates in coming days, after the Reserve Bank of Australia last week reduced the official cash rate (OCR) by 0.25 percent, to 3.85pc.

It is the first time the OCR has fallen below 4pc since May 2023.

The big four banks along with specialist rural lender Rabobank have all announced the cut will be passed on  in full.

Prominent Queensland-based agribusiness accounting and advisory firm Bentleys believed a reduction in interest rates would make a difference to producers – especially those under seasonal pressure.

Hamish McIntosh, the Director of Bentleys Finance said following a period marked by high inflation and fluctuating commodity prices, lower interest rates would ease the financial burden on rural businesses and improve their ability to increase access to credit.

“A 0.25pc reduction in the interest rate on a $5 million loan would result in annual interest savings of approximately $12,500,” he said.

“This can provide some relief to borrowers, particularly in the agriculture sector with tight margins or high debt servicing repayments.”

Banks have announced interest rate drops

• Rabobank will lower the variable base rate on its rural loans by 0.25pc per annum, effective 30 May
• NAB will reduce interest rates on eligible business lending products by 0.25pc p.a., effective 30 May
• CBA will reduce interest rates by 0.25pc p.a. on eligible business lending products, effective 30 May
• Westpac will reduce variable interest rates on cash-based loans by 0.25pc p.a. for business lending, including agribusiness loans, effective 3 June

Interest rates still historically high

Mr McIntosh said interest rates remain historically high with the cash rate at 3.85pc, which is above the RBA’s preferred long-term target range.

“Ideally, the RBA aims for a cash rate between the high 2pc and low 3pc range, depending on economic conditions. If inflation continues to decline, further rate cuts are likely,” he said.

“Several indicators suggest that interest rates may continue to decline in the short term. These include falling inflation, ongoing global economic uncertainty, and the impact of international trade tensions, stemming from United States trade policies.

“The RBA is closely monitoring the risk of stagflation – a scenario where inflation remains high despite stagnant economic growth.

“In response, the RBA may choose to pause or even reverse rate cuts to ensure economic stability is maintained.”

Banks lowering interest rates

Rabobank

Rabobank group executive for Country Banking Australia, Marcel van Doremaele said the latest adjustment followed a previous reduction of 0.25pc in Rabobank’s variable base rate for rural loans in February this year.

“This latest reduction means we have been able to lower the standard variable interest base rate for our rural lending clients by a total of half a percentage point to date this year, he said.

Rabobank Online Savings and Country Banking deposit rates had also been reviewed, according to Mr van Doremaele, with some reductions and some increases to be implemented across products.

The deposit rate changes will take effect on 23 May or 30 May, depending on the product.

*As of May 30 Rabobank’s All In One – Regulated Loan Variable Rate will reduce from 7.30pc p.a. to 7.05pc p.a.

NAB

New and existing business customers with a variable rate NAB Business Options Loan or a NAB Business Overdraft product will have their interest rate reduced by 0.25pc p.a. from May 30.

NAB Group Executive for Business & Private Banking Michael Saadie said lower interest rates drive greater confidence right across the business community.

“As businesses contend with global trade uncertainty, tariffs, costs and cashflow challenges, NAB is reducing interest rates to help our customers focus on what matters most – running and growing their business,” he said.

“While lower interest rates are welcome news, we know some business customers are facing tougher trading conditions which is why we have a range of support options available to those who need it.”

Eligible NAB business lending customers can choose to lower their repayments or continue at their current repayment level, reducing interest paid over the life of the loan.

Eligible business customers will see the new interest rate reflected on their next statement after 30 May.

*NAB Business Options Prime loan has an interest rate of 7.60pr p.a. and the Business Overdraft is 10.47pc p.a.

CBA

The rate reduction will apply to CBA Business Bank’s Variable Base Rate, Residential Equity Rate, and Overdraft Reference Rate, flowing through to business lending products including Better Business Loans and Business Overdrafts.

CBA Group Executive Business Banking, Mike Vacy-Lyle, said CBA is supporting customers, allowing them to grow and invest in their operations.

“We also know that some businesses are finding it tough, and we have a range of measures available for businesses facing difficulty. Any customer needing support should contact our dedicated Business Financial Assistance team.”

*CBA’s Better Business Loan currently has its variable rate (residentially secured) at 8.1pc p.a.

Westpac

Westpac variable interest rates on cash-based loans will be reduced by 0.25 per cent p.a. for business lending, including agribusiness loans, effective 3 June.

Westpac Acting Chief Executive, Consumer, Carolyn McCann said Westpac customers paying principal and interest will be notified directly about what this will mean for their repayments and how they can make changes.

*Westpac’s Business Loan variable rate is currently 7.66pc p.a. and the Business Overdraft variable rate is 7.86pc p.a.

ANZ

ANZ was contacted but did not respond before publishing deadline. Any response will be added here.

ANZ’s website stated it will lower interest rates for variable rate home loan customers by 0.25pc p.a. from May 30, but did not comment on if the cut would be passed on to business customers.

 * Rates will vary depending on personal circumstances and margins may apply. Contact your bank to find out if your interest rate is changing.