Interest rate cut not passed on in full by the big 4 banks

Posted on April 8, 2009 by peter 
Filed under Australia Mortgage and Finance News · Tagged: , ,

Australia: Following the reserve banks decision to cut the cash rate by25 basis points (0.25%) yesterday, the big 4 banks of Australia have decided not to pass on the full rate cut to borrowers – a decision which has angered federal and state governments, not to mention, consumers.

Westpac, along with the ANZ, has cut its standard variable home loan rate by 10 basis points (0.10%), in line with a similar move by the Commonwealth Bank of Australia.

interest_rateWestpac is the last of the Big Four banks to respond to the Reserve Bank’s rate reduction yesterday.

National Australia Bank, stands alone out of the big 4, with it’s decision to not pass on any of the cut to it’s borrowers – leaving its standard variable home loan rate unchanged.

From April 20th, Westpac will charge 5.81% on their standard variable loan. ANZ will have the same rate, effective from April 17.

”Westpac continues to manage the challenging funding conditions with careful consideration of the deteriorating economic environment and the impact on our customers,” Westpac Group Executive, Retail and Business Banking, Peter Hanlon said.

Yesterday, CBA said it would cut its standard variable mortgage rate by 10 basis points to 5.64%, effective April 17.

National Australian Bank has said it would not cut rates because of the high cost of wholesale funding. Its variable rate stays at 5.74%.

The big four have resisted calls from Treasurer Wayne Swan for them to pass the 25 basis-point cut on to customers. Banks that don’t pass on the interest rate cut need “a good kick up the bum”, according to Federal Treasurer – Wayne Swan.

Victoria State Premier John Brumby added his voice to calls for the big banks to pass on cuts in interest rates to borrowers today, saying, “The banks need to do this, there needs to be more competition in the market, and I’m quite disappointed these reductions haven’t been passed on,”.

Prime Minister Kevin Rudd also urged banks to reconsider their decisions.

Moving the lending rate from 5.91% to 5.81% knocks $21 off the average monthly repayment on a $350,000 mortgage over 25 years.

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