Greedy banks fail to pass on rate cuts in full
ANZ and Westpac have revealed their rate cuts after the RBA’s historic move as greedy lenders rack up huge profits at the expense of customers.
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Westpac customers will be given a 0.15 per cent reduction in their home loan interest rate, making them the third major bank to fail to pass on the full RBA cut.
ANZ has announced it will cut its rates between 0.14 per cent and 0.25 per cent.
None of the big four banks passed on Tuesday’s cash cut rate in full.
On Tuesday, the country’s biggest lender the Commonwealth Bank delivered just a fraction of the Reserve Bank’s quarter of a percentage point drop, shaving 0.13 off all owner occupier loans and investor principal and interest loans.
Investors paying interest-only will be the only ones to enjoy the full 0.25 percentage point cut.
National Australia Bank announced all owner occupier loans and investor principal and interest loans would fall by 0.15 percentage points.
But it took an extra day for rivals Westpac and then ANZ to finally budge, waiting until around 3pm on Wednesday.
Westpac passed on 0.15 percentage point cuts to all borrowers on variable loans.
While ANZ are passing on 0.14 percentage point cuts to all owner occupier borrowers and investor paying principal and interest.
However investors paying interest-only received a 0.25 percentage point cut.
It comes as News Corp reveals the nation’s greediest lenders have already profited a massive $547.6 million this year after failing to pass on the cash rate cuts in full.
And the worst offenders are ANZ which have held back $152.5 million in savings, followed by the Commonwealth Bank ($135.2 million), National Australia Bank ($132.9 million) and Westpac ($127 million).
And it’s expected they will line their pockets even further after Reserve Bank of Australia governor Dr Philip Lowe cut the cash rate for the third time this year — it now sits at just 0.75 per cent.
New analysis from financial comparison website Mozo estimated the banks have profited a massive $5.1 billion since May 2016 when they began collecting data on rate cuts falls involving the big four lenders.
The cash rate has been in free fall since November 2011 — there have been 15 cash rate cuts since then.
However if this month’s latest cut of 0.25 percentage points is passed on in full it would save borrowers with a $300,000 30-year owner occupier principal and interest loan on the average rate of 3.91 per cent about $43 per month.
This presumes their interest rate would drop to 3.61 per cent.
Mozo’s spokeswoman Kirsty Lamont said the big banks have failed to do the right thing by borrowers and pass on the cuts in full.
“The big banks haven’t done their mortgage customers any favours this year by failing to pass through the full benefit of the Reserve Bank’s rate cuts,” she said.
“Millions of borrowers around the country have been left out of pocket.”
She urged borrowers to “not cop it on the chin” and instead compare what other lenders had to offer.
“They are increasingly in a situation where they can’t afford to pass on the full benefit of the cut without taking a serious hit to their margins,” she said.
James Stone, 32, and his fiance Kelly Reynolds, 31, recently refinanced the mortgage on their three bedroom Patterson Lakes home in Melbourne’s southeast to save money.
The pair was thrilled with Tuesday’s rate cut and hopes their lender will pass it on in full.
They switched from Bank of Melbourne to HSBC this year, which saw their rate drop from about 4 per cent to 3.27 per cent on their $450,000 mortgage.
“We are getting married at the end of this year so the extra money will help go towards the wedding,” Mr Stone said.
“We are doing some renovation jobs on our house so the extra money will be used for that too.”
On a $450,000 mortgage, if their rate drops to 3.02 per cent they could save about $61 per month in repayments.
AMP Capital economist Dr Shane Oliver also said the downward spiral of cash rate cuts was far from over.
“Quite clearly the Reserve Bank is concerned that if the economy remains the way that it is that means ongoing weakness in wages growth and it will take even longer to get inflation back to target,” she said.
“We think there will be another cut in November on Melbourne Cup day and another cut again in February next year which would take us down to 0.25 per cent.
“Very low interest rates are starting to lose some of their potency.”
Mortgage Choice broker Tim Leonard said the cash rate cut should “drive some real interest from first-home buyers especially”.
“This is particularly in the mid-range of buyers from about $400,000 to $750,000 properties,” he said.
But he said borrowers were becoming “more savvy in regards to the rates they paying”.
“They are wanting a real piece of the action when it comes to low rates,” Mr Leonard said.
“Anybody with a home loan should be putting as much as possible into their offset or redraw accounts to prepare for a reversal in the rate trend, but eventually rates will eventually go up.”
WHICH BANKS PASSED ON THE CUTS in 2019
Lender June cut July cut October cut Total cut
CBA 0.25% 0.19% 0.13% 0.57%
Westpac 0.2% 0.2% 0.15% 0.55%
NAB 0.25% 0.19% 0.15% 0.59%
ANZ 0.18% 0.25% 0.14% 0.57%
Originally published as Greedy banks fail to pass on rate cuts in full