Commonwealth Bank, Westpac and NAB have refused to pass on interest rate cuts to variable home loan customers
Many mortgage customers are set to miss out on the latest RBA rate cut as the banks rake in $1 billion in interest charges by failing to pass on the reduction.
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THE big four banks stand to pocket about $1 billion by failing to pass on the latest rate cut to variable home loan customers.
The Commonwealth Bank, Westpac, National Australia Bank and ANZ on Wednesday announced rate drops to many mortgage fixed rate and business loan deals, but variable customers won’t be able to see any falls to their mortgage costs.
The Reserve Bank of Australia this week cut the cash rate by 0.15 percentage points and
both the RBA governor Dr Phillip Lowe and Federal Treasurer Josh Frydenberg declared the reduction should be passed onto borrowers.
This fell on dear ears by the big banks who instead lowered many fixed rate deals – Westpac now has the lowest owner occupier principal and interest rate at 1.89 per cent.
Westpac’s subsidiary brands including Bank of Melbourne, St. George Bank, BankSA and RAMS also made the same cuts across fixed rate mortgages and business loans.
New analysis from financial comparison website Mozo showed by not passing on the cut to variable home loan customers the banks will rake in hundreds of millions of dollars in interest charges in the next 12 months.
This includes CBA at $527 million, Westpac at $439 million, NAB at $282 million and ANZ at $234 million.
Chris Downer, 42, and wife Lauren, 37, are hoping their lender ING will pass on their rate cut to the variable component of their split loan.
They have a $441,000 loan on their four-bedroom property – this includes a three-year fixed rate of 3.83 per cent while their variable component is at 3.23 per cent.
“Every little bit helps so I hope they pass on the cut,” Mr Downer said.
“Hopefully our variable rate comes down to 3.08 per cent and I will probably ring the bank.
“When our fixed rate ends next year I’m looking to go variable and get a much better rate.”
For owner occupier borrowers on a principal and interest variable rate loan, if they do receive the 0.15 percentage point cut, on a $400,000 30-year loan it will bring their monthly repayments down to $1994 and save them $35 per month.
Mortgage Choice broker David Thurmond said about 90 per cent of his customers are on variable loans and he urged shoppers to hunt for a better deal if their lender doesn’t act.
“Before moving normally I suggest waiting one to two weeks and see what plays out with variable and fixed rates with your lender and other lenders,” he said.
“The squeaky wheel gets the grease so call up your bank and tell them you are refinancing or walk away unless they can sharpen the pencil, if that can’t they move if you can do it.”
Mr Thurmond said owner occupiers paying principal and interest should be getting a rate around 2.4 per cent.
Financial comparison website Mozo’s spokeswoman Kirsty Lamont said it was disappointing many variable rate customers had missed out on getting any rate relief.
“With many home loan customers struggling in the jobs market if they lender fails to pass on interest rate relief on their variable loan they’ll be in a difficult position trying to refinance without a stable income,” he said.
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Originally published as Commonwealth Bank, Westpac and NAB have refused to pass on interest rate cuts to variable home loan customers