Interest Rate Cut Breakdown

Posted on November 12th, 2012 · Posted in News

If the Reserve Bank lowers interest rates next month, the big question looms, which lenders are most likely to pass on the cut in full?

Judging by the general bank-beating that follows most official rate reductions, you might assume the big banks are the most stingy on this score.  However, a closer look at recent trends shows this generally isn’t the case. Figures released from Canstar suggest credit unions and building societies – known as mutuals – have been just as guiltyas the big four in failing to pass on the full rate cut.

Since the Reserve Bank began cutting rates last November, Canstar says mutuals have passed on an average of 98 basis points of the 150 basis points in official cuts. Non-bank lenders have passed on 99 basis points. Some smaller rivals to the banks have been more generous than this however it’s still only a tad less than the cuts that two of the big banks, the Commonwealth and ANZ, have passed on to their customers.

In another surprising result, the big bank that has passed on the least is NAB. This is the same NAB that last year claimed to have ”broken up” with the big four over their shabby treatment of customers – and yet it has passed on 89 of the 150 basis points.

This doesn’t mean borrowers shouldn’t shop around for a better deal. The non-bank lenders still have lower advertised rates than the big four, though the big banks often discount their standard variable mortgages by another 70 basis points or so. The NAB’s standard variable rate is the lowest of the big guys.

Clearly, the lenders’ unpopular tendency to keep some of the rate cuts for themselves is widespread. Shopping around is a good thing – it keeps banks on their toes.  Let us help you find a better deal.  Now is a great time to review your finances. Contact us today for a free finance review.