Borrowers could see more savings to their loans if there’s a rate cut on Melbourne Cup Day
The big four banks stand to make $5 million each day they fail to pass on the expected Reserve Bank of Australia’s cash rate cut on Tuesday.
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The big four banks stand to rake in nearly $5 million for each day they fail to pass on a highly-anticipated rate cut on Melbourne Cup Day.
Experts are predicting the Reserve Bank of Australia will slash the cash rate by 0.15 basis points and bring it down to a record low of .1 per cent on Tuesday.
The banks have come under increased financial pressure particularly during the pandemic with squeezed margins and also having more than 900,000 customers defer their loan repayments.
New data from financial comparison website Mozo analysis showed of the big four banks’ variable rate customer base, if they fail to pass on the expected 0.15 per cent rate in full or delay moving rates, it will earn them millions of dollars extra in interest charges a day.
This includes CBA who will keep $1.59 million in their pockets each day, followed by Westpac at $1.4 million, NAB at $912,000 and ANZ at $889,000.
The last time the RBA cut rates was on March 20 – ANZ was the only big four bank to pass on part of this cut, while the remaining big three banks did not pass on any of the fall.
Mozo spokeswoman Kirsty Lamont said if the RBA does cut the cash rate “it’s imperative the banks pass on this cut in full to borrowers”.
“It’s true to say the banks are in a tight spot and they’re feeling some pain on their profit margins and having to provision against the perspective of bad loans,” she said.
“However with so many consumers and businesses really being under financial pressure due to the pandemic, banks need to remember it’s time to put customers first, not their profit margins.”
On a $400,000 with an interest rate of 3 per cent, if the rate falls to 2.85 per cent, monthly repayments will reduce to $1654 and save the borrower $32 per month.
HSBC’s chief economist Paul Bloxham said he expects a cash rate cut on Tuesday which will deliver more financial relief for borrowers.
“This should feed through to putting further downward pressure on mortgage rates,” he said.
“We are talking about small moves, we think the cash rate will be cut by 15 basis points and we don’t think all of that will come through (to borrowers).”
According to Mozo’s database the cheapest variable rates for an owner occupier paying principal and interest on a $400,000 loan with an 80 per cent loan-to-value ratio is by smaller lender Well Home Loans at 2.17 per cent.
The monthly repayments are $1514.
BIG FOUR VARIABLE RATES
Lender Loan Interest rate Monthly repayments
CBA Extra Home Loan 2.69% $1620
NAB Base Variable Rate Home 2.69% $1620
Loan Special Offer
ANZ Simplicity Plus 2.72% $1627
Westpac Flexi First Option Loan Home
Special Offer 2.79% $1630
Source: Mozo data on a $400,000 owner occupier principal and interest loan on a 30-year term. Please note these may include introductory periods.
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