Powered by MOMENTUM MEDIA
the adviser logo
Lender

‘Unconscionable’ for majors to fail to pass on rate: FBAA

by reporter5 minute read
‘Unconscionable’ for majors to fail to pass on rate: FBAA

The managing director of the Finance Brokers Association of Australia has challenged the major banks for failing to pass on the RBA’s recent rate cut to existing borrowers.

Peter White AM, managing director of the Finance Brokers Association of Australia (FBAA), has said that it is “unconscionable” that the big four banks have not passed the recent interest rate cut on to their existing customers, given the current COVID climate.

On Tuesday (3 November), the Reserve Bank of Australia (RBA) cut the official cash rate from 0.25 per cent to a new record low of 0.10 per cent and began a broad-based quantitative easing program.

While several lenders – including Athena Home Loans, Homeloans.com.au and Mortgage House – have already dropped rates by the RBA’s drop of 15 basis points for existing customers, the major banks have so far only announced rate cuts for new customer, and largely for fixed rate loans.

Advertisement
Advertisement

Speaking of the move, Mr White said it was “beyond belief” that the banks had not passed the rate on to existing customers, too. 

“Have they learnt nothing from the royal commission?” Mr White pondered. 

“Home owners and small business are struggling across Australia, and the banks should not only immediately pass on the full cut for mortgages but also extend these lower interest rates to small business loans.

“This is the opportunity for the banks to build trust and send a message that they can put people above profits. I challenge them to do just that.”

The FBAA head also outlined that as other lenders are passing the reduction on, “borrowers should talk to their broker to consider what is best for their situation”.

Similarly, on Tuesday, RBA governor Philip Lowe said he did "expect" and "hope" that the rate cut would be passed on to borrowers, but he went on to recommend that borrowers seek to negotiate with lenders.

Dr Lowe commented: "The best outcome would be for standard variable rates to be lower. But, if that doesn’t happen, I am confident there will be pass-through occurring through people negotiating switching."

In a call to action, he continued: "I would encourage everybody to go and ask their bank for a better deal... and if they don’t give it to you, switch to a bank that will."

Several industry economists and commentators have noted that banks are becoming particularly hamstrung on variable rate reductions, given that ADIs usually reduce savings rates on deposits to provide cuts on mortgages. However, with interest rate levels already at record lows (and many deposit rates hovering near zero), net interest margins are becoming thinner and bank appetite to cut variable rates further have diminished.

[Related: Major banks slash interest rates]

 

peter white

JOIN THE DISCUSSION

You need to be a member to post comments. Register for free today

MORE FROM THE ADVISER

Stephen Hale ta

MFAA launches near-prime, specialist loan resource

Coined Finance for when your customer doesn’t fit the mould: A broker’s guide to near-prime and...

READ MORE
Daniel Newell Gedda

Specialist lender LoanU rebrands to Gedda

The personal and auto loan provider LoanU, which specialises in helping Australians with impaired credit histories...

READ MORE
tech tools

CBA introduces AI technology to combat scams

New figures released by the competition watchdog this week have revealed that Australians lost more than $2 billion...

READ MORE
magazine
Read the latest issue of The Adviser magazine!
The Adviser is the number one magazine for Australia's finance and mortgage brokers. The publications delivers news, analysis, business intelligence, sales and marketing strategies, research and key target reports to an audience of professional mortgage and finance brokers
Read more