Banks taking their time to pass on rate cuts: Michelle Hutchison
GUEST OBSERVATION
Eighteen lenders have so far announced rate cuts to their variable home loans since the Reserve Bank dropped the cash rate to 2.2%.
It's great to see that all of the 18 lenders that have so far announced rate cuts will be passing on the full 0.25 percentage points, with Westpac dropping further, by 0.28 percentage points. In particular, Loans.com.au lowered its variable home loan rates by the full 0.25 percentage points yesterday, securing its position for the lowest variable home loan rates on the market, from 4.23%.
Lender | Rate cut | Effective date |
| -0.25% | 12 February 2015 |
| -0.25% | 20 February 2015 |
| -0.25% | 24 February 2015 |
| -0.25% | 20 February 2015 |
| -0.25% | 20 February 2015 |
| -0.25% | 20 February 2015 |
| -0.25% | 20 February 2015 |
| -0.25% | 20 February 2015 |
| -0.25% | 20 February 2015 |
| -0.25% | 20 February 2015 |
| -0.25% | 4 February 2015 |
| -0.25% | 23 February 2015 |
| -0.25% | 20 February 2015 |
| -0.25% | 20 February 2015 |
| -0.25% | 23 February 2015 |
| -0.25% | 20 February 2015 |
| -0.28% | 20 February 2015 |
| -0.25% | 24 February 2015
|
Source: Finder.com.au, ranked alphabetically. Dates may vary for some customers.
*Some loan changes may be effective from 15/3/15.
Loans.com.au was also the fastest to pass on the interest rate cut, making its new rates effective immediately, sparking greater competition in the home loan market. This is in contrast to most lenders, which change their rates a couple of weeks later.
In fact, we analysed effective rate changes by the big four banks (as they hold the majority of home loan market share) following every Reserve Bank cash rate movement over the past five years and found that they were faster to pass on a rate increase than they were to pass on a rate cut. The big four banks took 11 days on average to pass on a rate cut to variable home loan customers, yet managed to pass on rate rises in just seven days.
ANZ and Westpac both took the longest to pass on rate cuts to their customers, at 13 days on average. Commonwealth Bank took eight days, while NAB passed on rate drops at the quickest average of seven days.
Commonwealth Bank were quickest to pass on a rate rise, at an average of three days. Following them were ANZ and NAB (both eight days), then Westpac (nine days). This means Commonwealth Bank passed on rate hikes around five days earlier than any of the big four banks.
The longer a bank holds on passing on a rate cut, the more money they'll squeeze from Aussie pockets before finally adjusting their rates. So it's no surprise we're seeing them taking more time to pass on discounts.
Though the numbers are concerning, it's highly unlikely these tendencies are limited to the big four banks, which means it's up to every Australian borrower to know if they're being ripped off. A good first step is to understand how the cash rate works and keep track of the movements, and then try to negotiate a better deal with your lender. They'll want to keep you onboard so fight hard!
If that doesn't work out, comparing home loans with other lenders is also a good option. In fact, there's a huge difference between what lenders are offering, with 5.12 percentage points difference between the cheapest variable rate home loan on finder.coma.au/home-loans at 4.23% and the most expensive at 9.35%.
The number of home loans on the market is continually growing, so compare other lenders and not just the big four banks to make sure you're getting the best deal.
The table below shows the lenders that have so far announced rate cuts and we will be updating this page as we hear more announcements.
Michelle Hutchison is spokesperson for comparison website finder.com.au.
