Big banks quick to agree but slow to act on interest rate cut

The big four lenders will save tens of millions of dollars by dragging their feet on implementation of the RBA rate cut.

The major banks were quick out of the blocks in announcing they will pass on the Reserve Bank’s rate cut in full, but all four lenders will save tens of millions of dollars by dragging their feet on implementation.

Customers of the Commonwealth Bank, the nation’s biggest home lender, will have to wait until March 24 for the 25-basis-point reduction in its standard variable rate to take effect.

As a result, CBA’s annual pre-tax profit will be about $50m ­higher than if the change took immedi­ate effect.

CBA said the timeframe was consistent with previous rate changes, and would help ensure necessary updates­ were made “accurately, safely and reliably to our … systems”.

It highlighted that its variable rate had fallen by 82 basis points since June last year, with an owner-­occupier paying off the principal and interest saving $2400 a year on a $400,000 loan.

The saving from the RBA’s cut on Tuesday would be $60 a month.

The Big Four’s decision to pass on the full Reserve Bank rate cut marked the first time they had done so since February 2015.

As the coronavirus spreads and the domestic economy slows, head of retail banking Angus Sullivan said the CBA had passed on the rate cut in full because of the “unique set of circumstances facing­ the country”, and the importan­t role played by the bank in supporting activity.

“We encourage customers to take advantage of these rec­ord low interest rates and contact us to reduce­ their minimum repayment, which will put extra money in their account each month,” Mr Sullivan said.

Westpac, the current industry villain because of its money laundering stoush with Austrac, ­­bur­nished­ its credentials by leading the industry out of the blocks, ­taking less than 30 seconds to declare it would pass on the full RBA adjustmen­t.

Customers, however, will have to wait until March 17 for the bank to honour its promise.

A Westpac spokesman said the bank had standardised its approach, with rate hikes and cuts now implemented in two weeks.

This was in response to critic­ism that the industry acted much more quickly when the RBA tightened monetary policy than in the reverse situation.

Westpac consumer boss David Lindberg said the bank recognised the coronavirus would have a direc­t impact on the nation’s economy, and had cut the variable rate for small business loans and overdrafts by 25 basis points as well.

“This will give our variable home loan and small business customers more money in their back pocket through passing on the full 0.25 per cent interest rate reduc­tion,” Mr Lindberg said.

NAB consumer banking head Mike Baird said the cut would encourage cash­flow. “In making these decis­ions, we have had to consider the un­pre­cedented challenges of the low-interest­-rate environment and impacts of the bushfires and coronavirus outbreak on our customers and the broader economy,” Mr Baird said.