Two major banks hold off on full interest rate cuts

ALTHOUGH most home buyers will enjoy the benefit of the RBA's aggressive interest rate cut - two major banks are playing Scrooge.

Two major banks hold off on rate cuts

ALTHOUGH most home buyers will enjoy the benefit of the Reserve Bank's aggressive interest rate cut - two major banks are playing Scrooge.

The RBA's cut of 100 basis points to 4.25 per cent should produce an average saving on a $300,000 loan of almost $200 a month.

The Commonwealth and National Australia banks jumped quickly to pass on the full cut, reducing their main variable rate to 6.74 per cent from December 12.

But Westpac announced it was passing on just 80 basis points while the ANZ is passing on 83 basis points.

The cut comes at the end of the most sustained reduction in rates since the early 1990s, starting in September.

Many economists and financial market operators say the rate cuts are not over yet, predicting further reductions totalling between 75 and 200 basis points before Easter.

Many non-bank lenders moved to pass on the rate cut and market leader Aussie Home Loans predicted borrowers would see the lowest rates "in decades" within four months.

The RBA move takes official rates back to the bottom of the previous low part of the cycle, in late 2001.

RBA governor Glenn Stevens said that while the Australian economy had been more resilient to the global economic downturn than other advanced economies, data indicated a significant moderation in demand and activity had occurred.

He also expects inflation will soon start to fall.

"Weighing up the international and domestic developments of recent months, the board judged that a further significant reduction in the cash rate was warranted now," Mr Stevens said.

The Rudd Government welcomed the rate cut, saying it would benefit families and businesses, and urged banks and other lenders to follow the Commonwealth and the NAB and pass on the reduction in full.

But Prime Minister Kevin Rudd refused an invitation to urge banks and other lenders to pass on rate cuts to credit card holders.

Access Economics chief Chris Richardson welcomed the cut but said it was not enough on its own because China's fortunes were central to Australia's economic strength, and China was in serious trouble.

The Australian Industry Group said the rate cut was vital to ward off recession and the construction sector expressed concern about the economy with Master Builders Australia saying the RBA was clearly worried about "the rapid deterioration in conditions".