Few lenders have announced a rate cut

By Terry Ryder, 4th November 2011

So far just 18 of more than 110 lenders have announced they will pass on at least part of the Reserve Bank's 0.25 percent cash rate reduction to mortgage customers, according to financial comparison site RateCity.

I note that the level of urgency by lenders in adjusting their rates when there’s a cut is different to that when there’s a rise.

However, RateCity says it expects “the overwhelming majority” of lenders to move over the coming week.

AMP, ANZ, Bank of Queensland, Bank of Melbourne, Bankwest, Commonwealth Bank, Hunter United, ING Direct, ME Bank, The Mutual, Police Credit Union, QT Mutual Bank, St George and Westpac will all pass on the full 25 basis point cut to mortgage customers within the month.

National Australia Bank will cut its variable mortgages only 20 basis points, while Yellow Brick Road is yet to name its price.

Some of the larger lenders yet to announce include Adelaide Bank, Bendigo Bank and Suncorp Bank, which are among the lenders with the largest slice of the Australian mortgage market.

Damian Smith, RateCity's CEO, says most lenders will be passing this on to variable rate loans.

"For around 2.5 million Australians with variable rate home loans, their repayments should be lower next month,” he says. “The big decision is what to do with any extra cash this change generates.”

Smith recommends that borrowers with a variable rate loan should keep their repayments at the previous level.

“If you can't do that because you were already struggling with cash flow at that repayment level, then look at a different loan,” he says. “The certainty of a low-rate fixed loan might be a better alternative for you.

"There's really no reason for lenders not to pass on the full rate cut - they need the business at the moment and will work hard for it. In fact, if your lender doesn't adjust your rate you should shop around and find a new lender."

I agree. Any lender that doesn’t pass on the RBA’s official interest rate cut deserves to lose your business.

ENDS

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