How the Big Four banks will make $21 million by delaying rate cuts
finder.com.au analysis shows just how much extra ANZ, CBA, NAB and Westpac gain by not immediately implementing interest cuts.
While all of the Big Four banks are passing on rates cuts for home loans following yesterday's cut to the official RBA cash rate, most are waiting a few days before introducing the reduced rates. Turns out they'll make a healthy bit of extra coin as a result.
An analysis by finder.com.au shows that Westpac will score at least $8 million dollars in extra repayments from customers by holding off on cutting rates until 23 May. Commonwealth Bank does nearly as well, with an extra $7.7 million because it's not changing rates until 20 May. NAB holding out until 16 May nets it $3 million in repayments. ANZ is rolling out the change the fastest with a switch on 13 May, but isn't passing on the full 0.25% cut, and will take in a handy $2 million in extra payments. In total, the big four will take in at least $20.9 million in extra payments by not immediately introducing the rate cut.
Those estimates are conservative, and are based on the repayments for an average Australian home loan of $357,200. We used finder's home loan calculator to work out what the repayments would be for a standard owner-occupied variable rate loan under the old and new rates. (For Westpac, we used the rate from its Bank of Melbourne subsidiary, which is the lowest of its main divisions, so it's likely to be an underestimate.)
We calculated the per-day difference between those rates, and multiplied that by the number of days between the RBA announcement and the cut coming into place, to work out the total level of extra repayment for an individual loan. Finally, we sourced the number of owner-occupied home loans for each of the banks in March 2016 from APRA, and multiplied that by the extra repayment number.
For an individual borrower, paying an extra $36 on their loan during May won't seem like much of an impost. However, when multiplied over a large number of customers, the total adds up fast.
| Bank | Delay | Cost to customer | # customers | Profit |
|---|---|---|---|---|
| ANZ | 10 days | $13.71 | 148,494 | $2,036,284.57 |
| Commonwealth Bank | 17 days | $30.69 | 253,781 | $7,787,960.93 |
| NAB | 13 days | $23.47 | 131,223 | $3,079,422.84 |
| Westpac | 20 days | $36.25 | 221,867 | $8,043,020.48 |
Realistically, banks will need time to introduce a broad-based rate change, so it's not surprising the changes aren't immediate. But those few days certainly make a difference to the level of repayments coming in.
If you're on a variable rate loan, check out our up-to-date list of which lenders are passing on the rate cut.
Picture: Shutterstock
