How the Big Four banks will make $21 million by delaying rate cuts

Angus Kidman 4 May 2016

MakingMoney

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.

BankDelayCost to customer# customersProfit
ANZ10 days$13.71148,494$2,036,284.57
Commonwealth Bank17 days$30.69253,781$7,787,960.93
NAB13 days$23.47131,223$3,079,422.84
Westpac20 days$36.25221,867$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

More great ideas from finder.com.au

Get a life insurance quote
Get a life insurance quote

Find out what it costs to protect yourself and your family

More info...
Refinancing home loans
Refinancing home loans

Choose from offers with rates as low as 3.39% p.a.

More info...
Google Pixel
Google Pixel

Compare plans for Google's flagship Android phone

More info...
Christmas ideas
Christmas ideas

Visit our Christmas homepage for gift ideas, markets, travel & deals

More info...

Ask a Question

You are about to post a question on finder.com.au

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Disclaimer: At finder.com.au we provide factual information and general advice. Before you make any decision about a product read the Product Disclosure Statement and consider your own circumstances to decide whether it is appropriate for you.
Rates and fees mentioned in comments are correct at the time of publication.
By submitting this question you agree to the finder.com.au privacy policy, receive follow up emails related to finder.com.au and to create a user account where further replies to your questions will be sent.

Ask a question
feedback