Australia’s Big Four Banks Rake In $1Billion By Refusing To Pass On Interest Rate Cut To Customers

Post by Sharat on April 9, 2009 · Under Australian Economy, Business News, banking, home loans, interest rates, loans, mortgages · Comment

Australian banking majors, the so called Big Four Australian banks have apparently saved $1billion between them by refusing to pass on the full extent of the cut in official interest rates effected by the Reserve Bank of Australia on Tuesday to their customers.

According to data which was obtained by The Daily Telegraph, Australians households should have seen savings of $800 million had the full 25 basis point cut been passed on, instead of the 10 basis point that 3 of the big four did in fact pass on.

NAB refused to pass on any of the cut in official interest rate to their standard variable rate customers resulting in a $240 million windfall.

CBA the nation’s largest mortgage lender with about a $160 billion variable rate mortgages book saved itself $239 million by passing on only a 10 basis point cut to their borrowers.

ANZ and Westpac both lowered their variable rates by the same margin yesterday and stand to save $152 million and $171 million respectively.

The data also suggests that the banks could expect to save a further $100 million each by keeping their business variable rates on hold, which all have done with the exception of Westpac.

Federal Treasurer Wayne Swan along with Prime Minister Kevin Rudd were not pleased that lenders did not pass the full extent of the cut on to their customers. The Kevin Rudd Government has had an unwritten tacit agreement with the big four which implied that any cut in official lending rates would be passed onto home owners. The move by the banks suggests that agreement is no longer valid.

“The failure of the banks to pass on this rate cut does blunt the effectiveness of monetary policy and, of course, does leave many customers with a higher burden than they otherwise should have, I’m pretty disappointed with what they’ve done. They take their commercial decisions. ”

“They’ll have to justify their position in the court of public opinion. They do need a good kick up the bum occasionally. So, on this occasion, I’m not happy with it. The Prime Minister isn’t happy with it. He’s asked them to reconsider.” Mr. Swan said.

Data shows that the Big Four banks hold almost 90 per cent of the Australian mortgage market.

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