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Analysis: Majors under attack over meagre rate cuts

Anyone who has a home loan with one of the big four banks (8 in 10 mortgage holders) will no doubt be miffed about missing out on the RBA’s full 25 basis point cut.

Judging by the comments on Mortgage Business and The Adviser on our coverage of the major bank rate cuts — which range from 10 basis points (NAB) to 14 basis points (Westpac) — mortgage brokers are less than impressed.

One broker commented that the majors are “showing their true colours ... profits, shareholders and CEO pay packets are more important than their customers.”

“The big four are all snubbing their nose at the RBA who is trying to stimulate the economy. A 0.10 per cent to a 0.14 per cent rate reduction will give consumers and businesses no confidence.”


Smaller banks have come to the rescue, with Bank of Sydney the first non-major to pass on the full 25 basis point cut. The FBAA’s Peter White applauded the lender when The Adviser broker the news early yesterday morning.

“Great to see you taking the high ground — one day the majors might understand,” he said.

The FBAA have since called on the big four to “not play scrooge” and pass on the full 25 basis point reduction.

“Banks must protect shareholders but they also must look after their customers. It was disheartening to find the CBA and NAB not passing on the full reduction which most banks passed on during the last official rate reduction in May,” Mr White said.

He went on to question CBA’s decision to start the new rate from August 19 — three weeks after the RBA’s cut.

“When rates rise the lenders lift their variable rates immediately! Again it is the customer who is being treated poorly.”

Treasurer Scott Morrison was quick to defend the majors during a 2GB radio interview with Ross Greenwood yesterday. Asked whether he was happy to hear the majors only passing on a portion of the full rate cut, Mr Morrison quickly reminded Mr Greenwood that the big four had increased term deposit rates.

It's not often […] that on a day when the cash rate falls, that there is actually good news for people with term deposits. Their rates are going up. So, the banks obviously provided a package back to their customers that deals with those who are saving money as well as those who are borrowing money. Now, whether those completely represent a full pass on of what happened with the Reserve Bank today, well, that's what the banks have to be transparent about,” Mr Morrison said.

However, the Treasurer did stress that “there is no reason for the banks not to fully pass on their improvement in their costs from today's Reserve Bank decision.”

“There is no reason why that shouldn't be fully passed on whether it's by increasing deposit rates or by cutting the mortgage rates. Because there are no overseas funding cost pressures which would justify not passing that on.”

Mr Greenwood highlighted that customers can still obtain a variable rate mortgage under 4 per cent by avoiding the big four, to which the Treasurer gave a response that the right spin doctor could easily use as an endorsement for the third-party channel:

“This is the great virtue of being able to switch banks and refinance and move around and shop around,” he said. “That's one of the great virtues of the system that we have and people should do that … ”

Mr Morrison was careful not to endorse or oppose the majors’ decision. He noted, quite rightly, that major bank customers will render the final verdict.

It’s time like these where mortgage brokers once again have the upper hand — a chance to win over the minority of Australians who still go direct to a bank for their home loan.

[Related: Third major bank cuts rates]

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