ANZ finally passes on full rate cut

Australia’s biggest bank has failed to pass on today’s full interest cut to its home loan customers, and other banks are following its lead.

Three of Australia’s four big banks have failed to pass on today’s full rate cuts to their home loan customers.

After ANZ said it would pass on the Reserve Bank’s 0.25 per cent cut to the cash rate to its borrowers, the remaining three major banks all responded by holding back part of the benefits from borrowers paying off their mortgages.

CommBank took more than three hours to respond to Tuesday afternoon’s Reserve Bank statement, announcing it would cut interest rates on its home loans but not all customers will see the rate cut passed on in full.

Owner-occupiers and investors paying principal and interest on standard variable rate home loans will have their rates cut by 0.19 per cent from 23 July, while those with interest-only loans will enjoy the full 0.25 per cent cut.

To soften the blow, the bank also took the opportunity to announce a special term deposit offer and limit the interest rate reduction on its NetBank Saver accounts.

The bank’s group executive of retail banking services Angus Sullivan said in a statement that CommBank has “carefully considered how to respond to this latest official interest rate cut”.

“With official interest rate settings already at record lows, we are focused on balancing the benefits and the costs of further interest rate reductions between our 1.6 million home loan and over 6 million savings customers,” Mr Sullivan said.

“We have passed on between 0.19 per cent and 0.25 per cent interest rate reductions for our home loan customers. We believe this combination of pricing changes delivers a fair balance of outcomes for both savers and borrowers.”

After CommBank’s announcement, NAB followed its lead announcing it would reduce its variable home loan interest rates by only 0.19 per cent.

NAB’s chief customer officer Mike Baird justified the bank’s decision not to pass on the full rate, saying it had assessed a range of factors including costs and competitive pressures in making the changes.

“The difference between what we charge and how much it costs us to fund a mortgage remains under pressure and while the circumstances of each RBA cash rate decision will vary and has some influence on the cost of borrowing money, it is not the only funding cost driver for NAB,” Mr Baird said.

The last of the big four to respond, Westpac, said it would reduce variable interest rates by 0.20 per cent for owner occupiers and 0.30 per cent for investors with interest-only repayments.

The announcements came after ANZ said it will pass on today’s full interest rate cut to borrowers after coming under fire from Treasurer Josh Frydenberg last month.

The bank took nearly two hours after Tuesday afternoon’s Reserve Bank statement to announce it would reduce all variable interest home loan rates in Australia by 0.25 per cent from Friday July 12.

“We looked at a number of factors before reaching this decision, including business performance, market conditions and the impact on our customers,” ANZ retail executive Mark Hand said in a statement. “On balance, we believe this is the right decision for our home loan customers and for our business.”

The 25 basis point cut, the second by the Reserve Bank in two months after nearly three years without a change, brings the official cash rate to a new record low of 1 per cent.

Last month the big banks rushed to announce they were passing on the cut to mortgage holders — CommBank and NAB the full cut, ANZ and Westpac only part.

“I think the ANZ has let down its customers,” Mr Frydenberg said in response at the time. “This is deeply disappointing from the ANZ.”

A handful of smaller lenders including Athena Home Loans and Resimac were quick to announce rate cuts this afternoon while the major banks were slow to respond. Westpac and NAB are still yet to announce how the RBA decision will effect their customers.

“Our expectation is that banks will be holding back on passing on the full cut as they seek to balance out mortgage rates with deposit rates and protect net interest margins,” CoreLogic senior research analyst Cameron Kusher said in an earlier note.

Product comparison site Canstar says big banks have, since 2011, passed on only 50 per cent of rate cuts in full. Rival Mozo estimates that by holding back some of the official interest rate cuts since 2016, big four banks have pocketed approximately $3.96 billion in additional revenue.

According to an analysis by comparison site Finder, a borrower with a 30-year, $500,000 mortgage at the current average variable rate of 4.62 per cent would save $26,730 over the life of the loan if today’s cut were passed on in full.

Athena Home Loans founder Nathan Walsh said the big banks reaped more than $100 million by delaying passing on the June rate cut by as much as 21 days, while those who failed to pass on the full cut pocketed at extra $280 million.

“Australians are sick of these games,” Mr Walsh said.

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— with AAP

IF BANKS PASS ON FULL RATE CUT

Mortgage size — new repayment — monthly saving

• $100,000 — $526 — $14

• $200,000 — $1,051- $28

• $300,000 — $1,577 — $42

• $400,000 — $2,103 — $55

• $500,000 — $2,628 — $70

• $600,000 — $3,154 — $83

• $700,000 — $3,679 — $98

• $800,000 — $4,205 — $111

• $900,000 — $4,731 — $125

• $1,000,000 — $5,256 — $139

(Source: ASIC. Figures for 25-year standard variable loan at an average new rate of 3.96 per cent, excluding fees)

RBA CHANGES SINCE THE GFC

The Reserve Bank raised the cash rate to a 12-year high 7.25 per cent in March 2008 before a series of cuts prompted by the global financial crisis.

• March 2008 — up to 7.25

• September 2008 — down to 7.00

• October 2008 — down to 6.00

• November 2008 — down to 5.25

• December 2008 — down to 4.25

• February 2009 — down to 3.25

• April 2009 — down to 3.00

• October 2009 — up to 3.25

• November 2009 — up to 3.50

• December 2009 — up to 3.75

• March 2010 — up to 4.00

• April 2010 — up to 4.25

• May 2010 — up to 4.50

• November 2010 — up to 4.75

• November 2011 — down to 4.50

• December 2011 — down to 4.25

• May 2012 — down to 3.75

• June 2012 — down to 3.50

• October 2012 — down to 3.25

• December 2012 — down to 3.00

• May 2013 — down to 2.75

• August 2013 — down to 2.50

• February 2015 — down to 2.25

• May 2015 — down to 2.00

• May 2016 — down to 1.75

• August 2016 — down to 1.50

• June 2019 — down to 1.25

• July 2019 — down to 1.00