Credit union cuts rates, gives banks run for their money

The move comes amid comments from the big banks of continued pressure on funding costs which could translate to higher interest rates for borrowers. The interest rate cut by CUA also marks the first major move by the credit union's new chief executive, Chris Whitehead, who once headed up the aggressive lender BankWest before it was acquired by Commonwealth Bank in late 2008.

The interest rate cut, available to existing and new customers, will take CUA's standard variable rate to 6.37 per cent. This compares to 6.86 per cent for the Commonwealth and 7.0 per cent for Westpac.

Mr Whitehead said the move was in response to diminished competition in the banking sector.

"The banking sector has become more concentrated over the last few years. There is a crying need for more competition," he said.

CUA was well placed to pass on savings to customers given profits in the business were all reinvested in competitive products.

CUA has 404,000 members, 800 staff and $7.7 billion in assets under management.

In another move against the banks, AMP's lending arm detailed plans last week to lower interest rates on its entry-level home loan products by 22 basis points.