The ANZ Bank took the decision after the Reserve Bank of Australia cut its cash rate to a record low of 2.0 percent on Tuesday.
The current annual variable interest rate of the ANZ Bank is 5.38 percent. For an average home loan of A$300,000 ($237,090.00), the cut means an annual saving of A$750 and it is expected that other lenders would also slash the rates because the mortgage market is highly competitive.
Meanwhile, shares in ANZ Bank today rallied after the first-half net profit of the bank jumped three percent to Aus$3.5 billion (US$2.7 billion). The profit increased due to growth in both domestic and international operations.
"ANZ has managed to grow its revenue while keeping its expenses flat, an outcome Westpac wasn't able to do," said CommSec market analyst Steven Daghlian.
CMC Markets chief strategist Michael McCarthy said the ANZ result was "a welcome relief" after Westpac's bad performance.
"The growth is good for ANZ and also the broader market, as it casts Westpac's result as one hit by its competitors rather than a broader industry slowdown," he said.
"Overseas earnings played a key role in lifting ANZ over its peer, and may become more of a strategic focus for bank boards. Domestic earnings also grew significantly, with NZ the major negative."