Lenders have been slow to react to the RBA’s 75 basis points rate cut, with CBA the only big bank to announce changes to its lending rates so far.
Last month the major banks wasted little time passing on most of the RBA’s 100 basis point rate cut.
CBA yesterday announced that it would pass on 58 basis points of the RBA’s reduction, effective for new and existing customers from next Monday November 10.
However the bank said that it could not deliver the full 75 basis points because of tight funding markets.
“Unfortunately, as a result of a significant increase in all three elements of our cost of funding over recent weeks, we have not been able to pass on the full amount of this latest decrease in interest rates,” CBA’s retail banking services group executive Ross McEwan said.
He added that the bank expected global financial markets to normalise over time and once that occurred they would be able to reduce rates by more than the RBA adjustments.
“Our customers can continue to expect additional out of cycle interest rate reductions,” he said.
Federal treasurer Wayne Swan expressed his dissatisfaction at CBA’s decision to pass on just 58 basis points.
"I'm disappointed with that; I'm hopeful the other banks will pass it on in full and, if they don't [pass on the full amount], I want to see it [some rate relief] happen as quickly as possible," Mr Swan told Fairfax Radio Network today.
Mr Swan said the banks had benefitted from the government’s guarantee and that he expected the full rate reduction to be passed on by CBA “in very quick time”.
While the banks have yet to collectively move on delivering the RBA cut to customers, the third-party market anticipates that the rate decrease will translate into increased broker business.
“From a real estate and mortgage broking perspective it’s a very encouraging sign,” Peter Bromley, general manager of LJ Hooker Financial Services told Mortgage Business.
“It will certainly bring more confidence to first home buyers, especially on top of the government’s increase in the first home buyer grant.”
According to Mr Bromley, brokers should also expect an immediate pickup in activity.
“There’s a big need for more information and greater understanding for first home buyers; they will be looking for leadership and advice,” he said.
Joe Sirianni, director of mortgage brokerage Smartline, agreed that the cut should stimulate borrower enquiry.
“We’ve seen a pretty rapid reduction in the cash rate now and predictions are that it will fall as low as four per cent – for anyone considering buying it’s certainly a great time to get in the market,” he said.
“The most important thing for brokers right now is to get in touch with their customers, make sure they know about the rate cut, and make sure they are getting the best rate available.”
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