The head of one of Australia’s largest brokerages has expressed frustration at some lenders putting shareholder interests ahead of those of the country’s borrowers, in the wake of last week’s RBA rate cut.
Mortgage Choice chief executive officer, John Flavell, said he is “disappointed” to see a selection of lenders choose shareholder profits over customer outcomes — especially given the market’s ongoing volatility with unemployment edging higher, consumer confidence dipping, and housing affordability still the Achilles heel of many.
He said that by holding onto the rate cuts they are simply ‘swelling’ their bottom lines at the expense of their customers.
“At a time when the economy could do with the lift that a cut to the cash rate would provide, it was deeply disappointing to hear some of the nation’s largest and most profitable lending institutions announce that only 10 or 13 of the 25 basis point reduction would be passed on to their mortgage customers,” Mr Flavell said.
“It would be very easy to let this partial rate cut pass under a veil of rhetoric around the cost of wholesale funds, and requirements to hold increased amounts of capital against mortgages.
“The reality is however, if all lending institutions chose an equally profit-focused approach and held back this proportion of the 25 basis point cut, then this equates to something like $2 billion dollars taken out of the pockets of Australian mortgage holders and placed onto the bottom line of institutions that are already generating tens of billions of dollars in profits every year.”
Mr Flavell reiterated that there is ‘no reason’ for a lender not to pass on the full quota of RBA rate reductions — as soon as they are announced.
“Interestingly, while lenders take weeks to pass on any rate cuts to their home loan customers, I wonder how long it takes for the same institutions to reduce the amount of interest they will pay on savings and transaction accounts.
“Knowing this, I would like to see more of our lenders act in the interests of their customers.”
None of the big four passed on the full RBA 25 basis point rate cut last week. Of them, Westpac moved by the largest amount, but only by 14 basis points. NAB, ANZ and CBA passed on cuts of only 10, 12 and 13 basis points respectively.
Westpac subsidiaries, St. George, Bank of Melbourne and Bank of South Australia also held back, passing on only 14, 13 and 13 basis points each.
Bank of Sydney did pass on the full 25 basis point cut, and brought its new-borrower owner-occupier variable rate to a historic low of 3.54 per cent as a result.
Bank Australia also passed the full 25 basis point cut on to its customers.
[Related: Non-majors lead the way with rate cuts]
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