Banks May Hold On To Rate Cut

Sydney Morning Herald

Tuesday September 2, 2008

Kelly Burke Consumer Affairs Reporter

MORTGAGE greed could collectively cost home loan customers almost $3.4 million a day for every day the big five banks delay passing on any anticipated interest rate cuts.

The Reserve Bank of Australia is widely expected to announce the first interest rate cut in seven years when it meets in Sydney today. The predicted 0.25 per cent cut will be welcome relief to home buyers who have weathered 12 consecutive interest rate rises over that time.

But an analysis by the consumer advocate group Choice has found that a cut of 25 basis points could save each of the major banks between $330,00 and $1 million a day if they delayed passing on the interest rate cut to consumers.

Although the National Australia Bank and the ANZ have already pledged to pass on any interest rate cuts to their customers, both banks confirmed yesterday there was likely to be a six-day delay in introducing the expected new rate because of the common practice of altering interest rates on a Monday.

This could collectively cost NAB and ANZ customers about $8 million in savings, according to Choice's calculations.

Meanwhile, Westpac, the Commonwealth Bank and St George, which together hold more than half of all bank-issued home loans, have yet to say whether they will be passing any savings on to their home mortgage customers, who will be left to pay about $2 million in extra interest each day.

"That's small fry for banks but a huge whack for home buyers," a spokesman for Choice, Christopher Zinn, said. "It was good enough for the banks to pass on a rate increase, and even increases outside the Reserve Bank. It should be good enough for them to now pass on any official cash rate cuts."

A spokesman from the Commonwealth Bank yesterday said it was company policy not to comment on hypotheticals.

"We pass on as much as we can to our customers," he said.

Westpac did not return the Herald's calls.

A spokeswoman for St George said if the Reserve Bank reduced its rates today, the overall cost of funding would need to be considered. "Our rates are constantly under review, and we'll look closely at the current environment at the time and make a decision then," she said.

Late yesterday, however, St George announced it would immediately cut its one- to five-year fixed interest rates by up to 0.76 per cent.

The Australian Prudential Regulatory Authority said the big five banks hold more than 80 per cent of the $700 billion bank home loan market.

© 2008 Sydney Morning Herald

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