Why the banks aren’t likely to pass on the next RBA rate cut in full


Alex Ritchie

Alex Ritchie

Jul 1, 2019( 3 min read )

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The RBA could cut the cash rate again as early as tomorrow however it’s unlikely the big four banks will pass it on in full, according to comparison site RateCity.com.au. 

When the RBA cut the cash rate in May 2016, the big banks, with the exception of ANZ, passed on 0.25 per cent to their variable rate customers. However, when the RBA cut again just three months later, not one of the big banks passed it on in full. 

RBA vs big banks: how much the big banks passed on to their mortgage customers in recent years

 

2015

2016

Variable home loan cuts

Variable home loan cuts

Date

4-Feb-15

6-May

4-May-16

3-Aug-16

RBA

-0.25%

-0.25%

-0.25%

-0.25%

ANZ

-0.25%

-0.25%

-0.19%

-0.12%

CBA

-0.25%

-0.20%

-0.25%

-0.13%

NAB

-0.25%

-0.20%

-0.25%

-0.10%

Westpac

-0.28%

-0.22%

-0.25%

-0.14%

RateCity.com.au research director, Sally Tindall, said the big banks are increasingly finding themselves in a rock and a hard place. 

“The RBA is now ready and willing to cut the cash rate. They’ve also made it very clear the banks should pass on these cuts to their variable home loan customers. 

“But the closer the cash rate gets to zero, the more banks will start feeling wedged. 

“Wholesale funding costs might have come down, but banks are trying to juggle deposit rates, lending rates, business costs and profit margins in what is an incredibly sluggish credit market. 

“What’s been really interesting is that while hundreds of thousands of existing mortgage holders missed out on a full cut last month, competition for new business is actually intensifying. 

“Last month we saw the lowest rate on the market for new customers fall from 3.44 per cent to 3.09 per cent – a drop of 0.35 per cent, 0.10 per cent more than what the RBA delivered. 

“If your bank doesn’t pass on the next rate cut in full, check out what other lenders are offering. If you’re determined to get a decent rate cut, you might have to be prepared to switch,” she said. 

Big bank standard variable rate vs cash rate change since 2015 

 

Jan-15

Jul-19

Difference

CBA SVR

5.90%

5.12%

0.78%

Westpac SVR

5.98%

5.18%

0.80%

NAB SVR

5.88%

5.11%

0.77%

ANZ SVR

5.88%

5.18%

0.70%

Cash rate

2.50%

1.25%

1.25%

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