The Commonwealth Bank failed to pass on the latest rate cut in full to most borrowers.
The Commonwealth Bank failed to pass on the latest rate cut in full to most borrowers.

Why your bank won’t pass on the full interest rate cut

Home loan customers are getting dudded by the big four banks by failing to reap the full benefit of the latest cash rate cut.

Reserve Bank of Australia governor Philip Lowe slashed the cash rate by 0.25 per cent on Tuesday, bringing it down to a record-low of just 0.75 per cent.

 

 

And economists are forecasting more cuts are on the horizon.

So why are the nation's biggest banks holding back some of the latest cut?

1) Commonwealth Bank

Cut most home loan products by 0.13 percentage points

New standard variable rate - 4.8 per cent

Latest annual profit: $8.6 billion.

CBA's executive of retail banking services Angus Sullivan said the bank has been unable to hand over the full rate cut because of a "balancing act".

The Commonwealth Bank’s executive of retail banking services Angus Sullivan said explained why the bank is unable to pass on the full rate cuts.
The Commonwealth Bank’s executive of retail banking services Angus Sullivan said explained why the bank is unable to pass on the full rate cuts.

"As the Reserve Bank cash rate has reached record lows, we face a difficult balancing act between the multiple, valid interest of our stakeholders," he said in an issued statement.

"Particularly given it is currently not feasible to pass on the full rate reduction to more than $160 billion of our deposits which are at, or near, zero rate."

 

 

He went on to explain how they needed to manage the needs of 6 million savings customers and 1.6 million home loan customers, as well as keeping their shareholders happy.

For owner occupier customers paying principal and interest, the SVR has dropped by 0.57 percentage points - delivering savings of about $140 per month on a $400,000 home loan.

2) National Australia Bank

Cut on most loan product products by 0.15 percentage points

New standard variable rate: 4.77 per cent

Latest annual profit: $5.5 billion

NAB's chief customer officer of consumer banking Mike Baird was more reserved than CBA and skirted around the fact the bank did not pass on the cuts in full to borrowers.

He highlighted the fact the bank drop investor interest-only rates by 30 percentage points - double of what was offered on all other types of variable mortgages.

 

 

"We acknowledge our housing investors paying interest-only have some of the highest rates, which is why we have decided to cut their rate by 30 basis points," Mr Baird said in a statement.

NAB’s chief customer officer of consumer banking Mike Baird explained how the bank wants to remain competitive in the home loan market.
NAB’s chief customer officer of consumer banking Mike Baird explained how the bank wants to remain competitive in the home loan market.

"While these changes further support our 930,000 home loan customers, we are aware of the growing impact reductions in interest rates have on our 3 million savings and investment customers and will continue to offer competitive interest rates on savings and term deposits."

For owner occupier customers paying principal and interest, the SVR has dropped by 0.59 percentage - delivering savings of about $145 per month on a $400,000 home loan.

 

3) ANZ

Waiting on an announcement

Standard variable rate: 4.93 per cent

Latest annual profit: $6.4 billion

 

4) Westpac

Waiting on an announcement
Standard variable rate: 4.98 per cent

Latest annual profit: $8.1 billion

sophie.elsworth@news.com.au

@sophieelsworth

 

WHO HAS MOVED SO FAR?

Athena -0.25%

• Commonwealth Bank - -0.13%

• Freedom Lend - 0.25%

• NAB -0.15%