Big four ignore Treasurer’s roar
THE big four banks have proven to customers they do as they please.
We’ve had three cash rate cuts in 2019 and none of the nation’s largest institutions – the Commonwealth Bank, National Australia Bank, Westpac or ANZ – passed them on in full.
This was much to the disgust of Federal Treasurer Josh Frydenberg, who ordered the Australian Competition and Consumer Commission to investigate why the banks didn’t pass on the RBA’s total 0.75 percentage point rate cut to borrowers. They only passed on between 0.55 and 0.59 percentage points.
Regardless of what the big four banks do or have done, they don’t have to worry too much. Four out of five mortgage customers still hold loans with the big banks, leaving only a small slice of the pie for the dozens of other lenders out there looking to snare clients.
Consumers might have been outraged after the horror show the financial services royal commission presented but whether it has had a significant impact on the big banks is yet to be seen.
The Australian Banking Association quizzed 1000 Australians and found, in the past 12 months, only 15 per cent switched transaction accounts, 10 per cent switched credit cards and 5 per cent switched their mortgages.
With Open Banking set to arrive in February 2020, consumers will have more power to take matters into their own hands.
Under the new regime consumers can share their personal transaction information between banks to help make educated decisions on whether they can score themselves better deals. But will they be comfortable having their personal transaction data shared among institutions? Time will tell.
The newest entrants into the banking sector – the digital-only banks such as Up Bank, Xinja, 86 400, Revolut, Volt and Judo Bank – are still only in their infancy.
Of those that do offer products – some neobanks haven’t got to this stage yet – they are yet to offer home loans, personal loans and credit cards. In the interim this means the big banks don’t have to worry about losing a horde of customers.
Then we have more cash rate cuts. Financial experts are predicting another one, possibly two are on the horizon.
Good news for borrowers but not for savers.
Grab the popcorn because it’s going to be fascinating to see where interest rates – both on home loans and deposit accounts – end up in 2020.