RBA rate cut

The Four Big Banks Say No Full RBA Rate Cut for Mortgage

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The big four Australian banks have not passed on the full RBA rate cut to customers and home-loan borrowers. The Reserve Bank of Australia has just cut the official cash rate by a further 25 basis points but this won’t all end in your pocket.

A full 0.25% is worth about $720 a year for people with a mortgage of $400,000. And you are only going to get a portion of that.

After Treasurer Josh Frydenberg’s call for banks to pass on the full cut was ignored for the third time this year, the treasurer asked the Australian Competition and Consumer Commission (ACCC) to investigate the pricing of residential mortgage products and what obstacles customers are facing in order to switch lenders.

The inquiry will concentrate on residential mortgage products of the four big banks as well as some smaller banks and non-bank lenders, but the focus will be on the four big banks which have a 75% share of the market.

 

the four big banks

 

Australia and New Zealand Banking (ANZ) and National Australia Bank (NAB) welcomed the inquiry and expressed their desire to explain why they are responding as they do to RBA rate cuts.

To date, the RBA has cut the official rate by 25 basis points three times: in June, July, and October. A total of 75 basis points for this year.

After the RBA announced the cut this October, the Commonwealth Bank of Australia (CBA) responded first by reducing its standard variable rate for home-loan customers by 13 to 25 basis points. They were followed by NAB. Westpac Banking Corporation and ANZ were the last to trim rates.

Here are what the big four banks are passing on from the RBA rate cut for your mortgage.

Commonwealth Bank of Australia

Angus Sullivan from their Group Executive Retail Banking Services said it is not currently feasible to pass on the full rate cut to more than $160 billion of their total deposits which are at or near-zero rates.

He admits that they are facing a “difficult balancing act” between the multiple, valid interests of their stakeholders and their customers.

He said, “In balancing these interests, we have carefully considered how to best meet the needs of over 6 million savings customers – who may find it challenging to make ends meet with record low savings interest rates – with the needs of our 1.6 million home loan customers, who want to pay less on their mortgages; and the needs of our shareholders, many of whom are retirees who rely on our dividend.”

How Much of the RBA Rate Cut Will Flow to Customers

The CBA is reducing standard variable rates for home loan customers by 13 to 25 basis points. This will take effect on October 22, 2019, and the new fixed rates will be available starting October 3, 2019.

  • Owner Occupied P&I Standard Variable Rate home loans will be reduced by 0.13% p.a to 4.80% p.a.
  • Investor P&I Standard Variable Rate home loans will be reduced by 0.13% p.a. to 5.38% p.a.
  • Owner Occupied I&O Standard Variable Rate home loans will be reduced by 0.13% p.a. to 5.29% p.a.
  • Investor IO Standard Variable Rate home loans will be reduced by 0.25% p.a. to 5.64% p.a.
  • Two and three-year Owner Occupied P&I Fixed Rates in the Wealth Package will be reduced to 2.99% p.a.
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National Australia Bank

Mike Baird, NAB’s Chief Customer Officer Consumer Banking, said they are going to give 15 basis points reduction for owner-occupier customers paying the principal and interest, and 30 basis points reduction for housing investors paying interest-only.

He said that owner-occupier customers could potentially save $444 a year for a $400,000 home loan.

“This is on top of the 44-basis point reduction across June and July this year, which means customers with an average $400,000 loan could save a total of $1,740 a year,” Mr. Baird said.

 

How Much of the RBA Rate Cut Will Flow to Customers

The NAB will decrease variable interest home loan rates by 15 basis points and the changes will take effect on October 11, 2019.

  • Variable owner-occupier Principal and Interest (P&I) loans will be reduced by 0.15% p.a. from 4.92% p.a. to 4.77% p.a.
  • Variable investor P&I loans will be reduced by 0.15% p.a. from 5.52% p.a. to 5.37% p.a.
  • Variable owner-occupier Interest only (IO) loans will be reduced by 0.15% p.a. from 5.49% p.a. to 5.34% p.a.
  • Variable investor IO loans will be reduced by 0.15% p.a. from 5.97% p.a. to 5.67% p.a.

 

Westpac Banking Corporation

Consumer Division Chief Executive David Lindberg of Westpac assured customers they’re committed to providing support and finance help for loan repayments and first home purchases, and those, including commercial pressures, were all factored in their decision.

  • Westpac is reducing their Standard Variable Rate (SVR) to the lowest they have on record for owner-occupiers with principal and interest repayments.
  • Variable home loan (owner occupier) rates will be reduced by 0.15% p.a. to 4.83% p.a. for customers with P&I repayments.
  • Variable residential investment property loan rates will be reduced by 0.15% p.a. to 5.38% p.a. for customers with P&I repayments.
  • Variable home loan (owner occupier) rates will be reduced by 0.15% p.a. to 5.42% p.a. for customers with IO repayments.
  • Variable residential investment property loan rates will be reduced by 0.15% p.a. to 5.64% p.a. for customers with IO repayments.
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How Much of the RBA Rate Cut Will Flow to Customers

Effective October 16, 2019, Westpac will be trimming home loan rates by 15 basis points.

 

Australia and New Zealand Banking

The decision of ANZ, the last of the four big banks to cut its interest rates, aims to balance customer needs in a low rate environment, business performance needs, and their acknowledged role in stimulating the economy.

According to Mark Hand, Group Executive Australia Retail & Commercial, “We were able to match the full rate reduction in July and the majority in June, however, the dynamics of record-low interest rates has resulted in a reduction in variable home lending rates of between 0.14% p.a. and 0.25% p.a. this time around.”

  • For Standard Variable Rate Owner Occupiers paying P&I the Index Rate will reduce by 0.14% p.a. to 4.79% p.a.
  • For Standard Variable Rate Investors paying I&O the Index Rate will reduce by 0.25% p.a. to 5.74% p.a.
  • 2 & 3 year fixed rates for Owner Occupiers paying P&I will be reduced to 2.98% p.a. (with ANZ Breakfree Package)
  • 2 & 3 year fixed rates for Investors paying I&O to 3.49% p.a. (with ANZ Breakfree Package)

 

How Much of the RBA Rate Cut Will Flow to Customers

The ANZ will reduce all their standard variable interest home loan rates by 14 to 25 basis points and the changes will be effective from October 11, 2019. Fixed changes, on the other hand, will be effective on October 3, 2019.

 


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