No excuse for lenders not to pass on Reserve Bank cash rate cut!
- Reserve Bank dropped cash rate sooner than most anticipated: finder.com.au Reserve Bank Survey
- Variable borrowers with an average $300,000 mortgage can expect $47 saving per month
- Lenders kept 0.45 percentage points from variable borrowers: no reason not to pass on rate cut!
February 3, 2015, Sydney, Australia – Lenders will be closely monitored for passing on the full rate cuts to their customers, by one of Australia’s biggest comparison websites finder.com.au.
It’s now up to the two million households with a variable rate home loans across Australia to watch their lender and ensure they receive the full cash rate cut.
The cash rate drop was the first move by the Reserve Bank for the past 18 months and hits a new record low of 2.25 percent.
Bank of Queensland was the first to announce that it will be passing on the full 0.25 percentage points to their variable rate home loan customers, effective February 24, 2015.
While most of the 30 experts and economists in the finder.com.au Reserve Bank Survey were not anticipating the cash rate to fall today, nine experts (30 percent) were forecasting a cash rate drop to occur in the first quarter of 2015, including three of the four major banks:
- Shane Oliver, AMP Capital
- Warren Hogan, ANZ
- Lisa Montgomery, Mortgage and Consumer Finance Expert
- John Caelli, ME Bank
- Alan Oster, National Australia Bank
- Linda Janice Phillips, Propell
- Angus Raine, Raine & Horne
- Nathan McMullen, RAMS
- Bill Evans, Westpac
However, there is still a chance the Reserve Bank will lift the cash rate according to the survey results, with 16 of the 30 experts expecting to see a rise within the next 18 months.
Michelle Hutchison, Money Expert at finder.com.au, 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.
“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.
“Lenders have kept 0.45 percentage points on average of cash rate cuts from variable rate home loan customers since the cash rate began to fall in November 2011. While the cash rate has dropped by 2.25 percentage points since November 2011, from 4.75 percent to 2.5 percent, standard variable home loan rates have fallen by 1.80 percentage points, from 7.31 percent to currently 5.51 percent, according to finder.com.au/home-loans 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.”
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 haven't passed on the full rate cuts. That's about $2.7 billion that lenders have kept from the estimated two million households with a variable rate home loan since August 2013.
"Lenders should lower their rates in line with the former margin we saw 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. However, borrowers shouldn't wait around for further discounts that might never come, as there's a huge difference between what lenders are offering, with 4.87 percentage points difference between the cheapest variable rate home loan on finder.com.au/home-loans at 4.48 percent and the most expensive at 9.35 percent.
“With this in mind, most lenders have room to negotiate with borrowers so it's worth talking to your lender and asking for a discount or switching to a better value deal. This could save you much more than $84 per month."
Disclaimer: the comments, forecasts, projections and other predictive statements by the panel of experts are assumptions based on currently available information. These forecasts are based on industry trends and economic factors that involve risks, variables and uncertainties. No guarantee is presented or implied as to the accuracy of these forecasts and consumers are advised to read product disclosure statements and understand if financial products are right for them before signing up.
For further information
The information in this release is accurate as of the date published, but rates, fees and other product features may have changed. Please see updated product information on finder.com.au's review pages for the current correct values.
More than 3 million Australians turn to finder.com.au every month to save money, time and make important life choices. We compare virtually everything from credit cards, phone plans, health insurance, travel deals and much more.
Our free service is 100% independently-owned by two Australians: Fred Schebesta and Frank Restuccia. Since launching in 2006, we’ve helped our users make more than 17 million decisions.
We continue to expand and launch around the globe, and now operate in the United States and United Kingdom. For further information visit www.finder.com.au.