We all welcome the rate cut decision from the RBA after months of no movement and one would think that movement would filter down to your home loan but the big banks insist they can't afford to pass on the Reserve Bank's interest rate cut, and mortgage holders are increasingly likely to respond by switching from these lenders.
Since the RBA cut the cash rate by 25 basis points to 3.25 per cent last Tuesday, Westpac, Commonwealth Bank, ANZ and National Australia Bank have not passed on the full 25bp drop, citing high deposit costs.
St George followed the lead of the major banks, lowering its standard variable home loan rate by 17 basis points to 6.69 per cent - from October 15.
ING Direct passed on the full 0.25 of a percentage point rate reduction, only a few lenders so far have passed on the rate in full.
So why do some lenders pass on the savings and others dont? The lenders are saying the cost of funding loans was not solely reliant on the RBA's cash rate, citing the high cost of wholesale funding and the consistently high interest rates they pay for deposits.
The credibility of that excuse has been questioned, with the Reserve Bank itself saying recently that wholesale funding markets were cheaper than during the recent euro area debt crisis.
The respected Australian Economic Record also released figures last week showing Australian Banks had on average passed on 116 per cent of each rate rise and only 84 per cent of each cut.
An Ernst and Young report found that 66 per cent of people think there are better deals available than their present loans.
So in the words of our Treasurer Wayne Swan "If you're not happy with your lender, then I encourage you to look for a better deal".... Compare over 800 home loan products here.
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