Australia’s big four banks are coming under fire for being slow to react to the Reserve Bank of Australia’s decision to cut the cash rate to a record low 0.1 per cent from 0.25 per cent on Tuesday.
Westpac, ANZ, National Australia Bank and the Commonwealth Bank have so far failed to reveal if they will pass on any rate cuts to new or existing customers.
Research director at RateCity.com.au, Sally Tindall, is now calling the big four banks to follow the lead of the Reserve Bank.
“Governor Lowe has made it clear he expects these rate cuts to be passed through to borrowers,” she said.
“It appears the big four banks are playing a game of poker, waiting for their opponents to show their hand.”
Tindall is encouraging customers of the big four banks, which hold around three quarters of home loans in Australia, to contact their banks immediately.
“If the big banks don’t pass on this rate cut in full, millions of Australians could miss out on hundreds of dollars at a time when families need it most,” she said.
“If your bank hasn’t made a decision, call them, tweet them, or comment on their Facebook page to put pressure on them to do the right thing by you.
“Now’s the time to remind them that you’re expecting a cut.”
RBA cuts the cash rate
In its first monetary policy easing since March, the board also agreed to similar reductions for other measures to keep market interest rates and funding costs low across the economy.
“With Australia facing a period of high unemployment, the Reserve Bank is committed to doing what it can to support the creation of jobs,” Reserve Bank governor Philip Lowe said in his post-meeting statement on Tuesday.
However, he believes the economic recovery is under way in Australia and positive economic growth is now expected in the September quarter, despite the restrictions in Victoria.
“The priority over the next few years is jobs with inflation risks remaining low,” the governor said during a press conference on Tuesday.
“The board is not expecting to increase the cash rate for at least three years.”
What you’ll save if banks follow the RBA
Repayments on a $400,000 mortgage will drop by around $33 a month on average if retail banks fully pass on today’s 0.15 per cent cut in the cash rate by the Reserve Bank.
If your mortgage is (size, new monthly repayments, reduction):
SIZE: $200,000NEW MONTHLY PAYMENTS: $898.09 REDUCTION: $16.83
SIZE: $250,000NEW MONTHLY PAYMENTS: $1122.61REDUCTION: $21.04
SIZE: $300,000NEW MONTHLY PAYMENTS: $1347.13REDUCTION: $25.24
SIZE: $350,000NEW MONTHLY PAYMENTS: $1571.66REDUCTION: $29.45
SIZE: $400,000NEW MONTHLY PAYMENTS: $1796.18REDUCTION: $33.66
SIZE: $450,000NEW MONTHLY PAYMENTS: $2020.70REDUCTION: $37.87
SIZE: $500,000NEW MONTHLY PAYMENTS: $2245.22REDUCTION: $42.07
SIZE: $550,000NEW MONTHLY PAYMENTS: $2469.75REDUCTION: $46.28
SIZE: $600,000NEW MONTHLY PAYMENTS: $2694.27REDUCTION: $50.49
This assumes 30-year discounted bank variable rate loan at an average new interest rate of 3.50 per cent.
Which banks have passed on the RBA interest rate cuts?
Commonwealth Bank of Australia – rate cut is yet to be confirmed
ANZ Bank – rate cut is yet to be confirmed
National Australia Bank – rate cut is yet to be confirmed
Westpac Bank – rate cut is yet to be confirmed
Athena Home Loans – 0.15% rate cut
Mortgage House – 0.15% rate cut
Pacific Mortgage Group – 0.10% rate cut
Freedom Lend – 0.20% rate cut
Homeloans.com.au – 0.15% rate cut
Home Star Finance – 0.15% rate cut (for new customers only)
Reduce Home Loans – 0.12% to 0.20% rate cut (for new customers only)
$100 billion bond program
The central bank also reduced its three-year bond yield target rate and its term funding facility rate for banks to 0.10 per cent from 0.25 per cent.
The Reserve Bank has also introduced a $100 billion bond program for five to 10 year maturities.
“The combination of the RBA’s bond purchases and lower interest rates across the yield curve will assist the recovery by; lowering financing costs for borrowers; contributing to a lower exchange rate than otherwise; and supporting asset prices and balance sheets,” Dr Lowe said.
The reduction in the cash rate is the first since March this year, when it was reduced twice in the month, the second coming at a special board meeting at the onset of the pandemic.
– with AAP