Australia’s non-major lenders have been quick to slash variable rates after the Reserve Bank cut the official cash rate to 2.25 per cent yesterday.
Bank of Queensland was the first to announce that it will be passing on the full 0.25 percentage points to its variable-rate home loan customers, effective 24 February 2015.
Within minutes of BOQ’s announcement, ME Bank confirmed that it too will pass on the full 25 basis point rate cut to its customers.
ME Bank’s Standard Home Loan variable interest rate will drop to 5.13 per cent per annum, while its member package rate will fall to 4.93 per cent per annum, providing one of the most competitive rates for home loans up to $500,000.
The new home loan rates are effective 20 February 2015.
ING Direct will also lower the interest rate on its variable mortgages by 0.25 per cent, effective 20 February 2015.
Following this reduction, the rate on ING Direct’s Mortgage Simplifier product will be 4.97 per cent per annum.
Finder.com.au spokesperson Michelle Hutchinson said lenders have no reason not to pass on the full 0.25 percentage point rate cut to their variable home loan customers.
"It would be disappointing to see any lenders not passing on the full rate cuts to their variable rate home loan customers because they have kept some of the rate cuts in the past,” she said.
“If lenders pass on the full 0.25 percentage points to their variable rate home loan customers, borrowers with an average $300,000 home loan can expect to pay $47 less in mortgage repayments from next month.”
On average, lenders have kept 0.45 percentage points of cash rate cuts from variable-rate home loan customers since the cash rate began to fall in November 2011, according to Ms Hutchinson.
While the cash rate has dropped by 2.25 percentage points since then, from 4.75 per cent to 2.50 per cent, standard variable home loan rates have fallen by 1.80 percentage points, from 7.31 per cent to currently 5.51 per cent, according to finder.com.au's research.
“Back then, the difference between the cash rate and the average standard variable rate was 2.56 percentage points and now that gap has widened to 3.01 percentage points,” Ms Hutchinson said.
According to finder.com.au, since the last cash rate cut in August 2013, borrowers with a variable rate home loan have missed out on $84 per month or $1,344 each for an average $300,000 home loan because lenders have not passed on the cuts in full.
That represents about $2.7 billion which lenders have kept from an estimated two million households with a variable-rate home loan since August 2013.
Ms Hutchinson argued that lenders should lower their rates in line with the margin seen before rates began to fall, of 2.56 percentage points.
"Lenders have room to move if they want to, with an average of 0.45 percentage points up their sleeves,” she said.