Banks hoarding rate cut

THE Commonwealth Bank was the only of the big four banks to yesterday pass on some of the latest interest rate cuts to borrowers.

The nation’s biggest lender passed on just a fraction of the Reserve Bank’s quarter of a percentage point drop, shaving 0.13 off all owner occupier loans and investor principal and interest loans.

Investors paying interestonly will be the only ones to enjoy the full 0.25 percentage point cut.

It comes as News Corp reveals the nation’s greediest lenders have already profited a massive $547.6 million this year after failing to pass on the cash rate cuts in full.

The worst offenders are ANZ, holding back $152.5m in savings, followed by the Commonwealth Bank ($135.2m), National Australia Bank ($132.9m) and Westpac ($127m).

And it is expected they will line their pockets further after Reserve Bank of Australia governor Dr Philip Lowe yesterday cut the cash rate for the third time this year – it now sits at just 0.75 per cent.

New analysis from financial comparison website Mozo estimated the banks had profited a massive $5.1 billion since May 2016 when they began collecting data on rate cuts falls involving the big four lenders.

The cash rate has been in free fall since November 2011 with 15 cash rate cuts since.

If this month’s latest cut of 0.25 percentage points were to be passed on in full it would save borrowers with a $300,000, 30-year owner occupier principal and interest loan on the average rate of 3.91 per cent about $43 per month.

This presumes their interest rate would fall to 3.61 per cent.

Mozo’s spokeswoman Kirsty Lamont said the big banks had failed to do the right thing by borrowers and pass on the full cut.

“The big banks haven’t done their mortgage customers any favours this year by failing to pass through the full benefit of the Reserve Bank’s rate cuts,” Ms Lamont said.

“Millions of borrowers around the country have been left out of pocket.”

She urged borrowers to “not cop it on the chin” and instead compare with other lenders.

“They are increasingly in a situation where they can’t afford to pass on the full benefit of the cut without taking a serious hit to their margins,” Ms Lamont said.

AMP Capital economist Dr Shane Oliver also said the downward spiral of cash rate cuts was far from over.

“We think there will be another cut in November on Melbourne Cup day and another cut again in February next year, which would take us down to 0.25 per cent,” Ms Oliver said.

Mortgage Choice broker Tim Leonard said the cash rate cut should “drive some real interest from first-home buyers especially”.