Lenders Rebuked For Hoarding Rate Cuts

Posted on 11/10/2019  
Lenders Rebuked For Hoarding Rate Cuts

Banks large and small have ignored calls from government and business leaders to pass on the latest RBA rate reduction in full.

Some have passed less than half of 0.25 decrease through to their mortgage customers, who are being encouraged to shop around and switch to lenders offering the best deals.

Prime Minister Scott Morrison, Reserve Bank Governor Philip Lowe and Federal Treasurer John Frydenberg have all rebuked lenders, saying there’s no excuse for failing to pass on the RBA rate reduction to customers in full.

The CBA cut its owner-occupied rate by 0.13, ANZ by 0.14, while NAB and Westpac managed 0.15. Bank of Queensland has emerged as one of the stingiest banks, passing on only 0.10.

Independent analysis suggests the Big Four banks are reaping an extra $14 billion a year in interest repayments after withholding a quarter of all Reserve Bank rate cuts since 2011 while at the same time reducing term deposit interest rates by more than the official cash rate reductions.

Comparison website RateCity says standard variable rates have fallen by 2.99% since October 2011. Over the same period, the RBA has reduced the cash rate by 4%.

The big four banks’ margin on average standard variable home loans has grown to 4.05% over the cash rate, compared to the 3% difference when the RBA began its latest round of monetary easing in 2011. The margin is now double the 2% margin that existed ­before the GFC.

The RateCity analysis found three-year term deposit rates had been slashed by 4.3%, compared with the 4% reduction in the cash rate. Interest paid on everyday ­access accounts was sliced by 4.5% over the same period.

“Mortgage holders have a reason to be disappointed in the banks, basically, profiteering,” the Morrison says.

Reserve Bank governor Philip Lowe says the lower cash rate should have been fully passed through into standard variable mortgage rates. “Full pass-through would also mean that the economy ­receives the full benefit of today’s policy decision,” he says.

Treasurer Josh Frydenberg has urged customers to shop around for better deals. He says it’s disappointing to see the major banks refusing to pass on the cuts in full and that "customers should vote with their feet" and consider switching to smaller lenders.

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