Borrow
Reason for rate cut lag revealed
The consumer watchdog has revealed the reason central to the decisions of Australia’s big four banks to not always pass on RBA rate cut savings to home loan customers in 2019.
Reason for rate cut lag revealed
The consumer watchdog has revealed the reason central to the decisions of Australia’s big four banks to not always pass on RBA rate cut savings to home loan customers in 2019.

The Australian Competition and Consumer Commission’s (ACCC) Home Loan Price Inquiry interim report has just been released, which revealed the banks’ major motivators in not passing on savings to consumers.
ACCC chair Rod Sims commented that “the banks were attempting to shore up their profitability during a period of low interest rates”.
“It was their strong preference, after the RBA’s cuts, not to further reduce the rates customers were earning on some deposit products as they approached zero per cent,” he indicated.
He added that “the banks’ reluctance to cut these deposit rates led them to anticipate lower profits, which they aimed to recover by not always fully passing through cash rate cuts to their mortgage customers”.

Analysis from the consumer watchdog also found that the big four banks had benefited from sustained decreases to their funding costs over the course of 2019, with the report revealing that while headline rates for owner-occupier home loans with principal and interest repayments did fall overall during 2018 and 2019, the banks’ funding costs fell even more over the same period.
The interim report also revealed that while average interest rates charged by banks on home loans did fall across 2019, customers are still paying more than they should be due to a lack of price transparency and higher interest rates impacting existing customers.
One finding from the report even flagged that home loan pricing practices continue to make it difficult for consumers to compare different mortgage products.
Mr Sims said the inquiry findings “shed an important light on bank decision making and raise questions about whether the banks could, at the time, have passed on a higher proportion of those RBA cash rate cuts to their mortgage customers”.
At the same time, he said the ACCC does recognise that “much has changed in the economic and funding environment since last year”.
“The banks are playing an important role in supporting the economy.”
The interim report examined home loan prices charged by the big four banks between 1 January 2019 and 31 October 2019.
Treasurer Josh Frydenberg issued the direction for an inquiry into the market for the supply of home loans in October last year after he expressed frustration with the big four banks for not fully passing on rate cut savings from the Reserve Bank of Australia in July 2019 or October 2019.
More to come.
About the author

About the author


Banking
Bendigo Bank named most trusted bank in Australia for 10th consecutive quarter
Bendigo Bank has retained its position as Australia's most trusted bank, according to the latest trust rankings released by research firm Roy Morgan. Read more

Banking
Account-to-account and instant payments set to reshape global payments landscape
A new report from Capgemini predicts that instant payments will account for 22% of all non-cash transactions globally by 2028, signaling a major shift in the payments industry. Read more

Banking
Powell's Jackson Hole speech to shape market expectations on rate cuts
All eyes are on Federal Reserve Chair Jerome Powell's upcoming speech at the Jackson Hole symposium, as investors anxiously await clues about the central bank's future rate decisions. Read more

Banking
Bendigo Bank economist forecasts stable rates for 2024, cuts in 2025
Bendigo Bank's Chief Economist David Robertson is maintaining his prediction that the Reserve Bank of Australia (RBA) will keep interest rates unchanged throughout 2024, with cuts likely to begin in ...Read more

Banking
Hawkish central bank expectations dampen market sentiment, boosting dollar
Recent economic data and central bank communications have dampened the market's appetite for risk assets, leading to a stronger US dollar and a pullback in commodities and equities, according to Ipek ...Read more

Banking
Bank of England expected to provide guidance on future rate cuts at today's MPC meeting
European and UK stocks are outperforming their US counterparts due to a combination of factors, including high valuations in the US, strong corporate earnings from European companies, and expectations ...Read more

Banking
Investors advised to prepare for central bank policy divergence, says deVere CEO
The Bank of England, European Central Bank (ECB), and US Federal Reserve are set to take different paths in their monetary policies, which will significantly impact investors around the world, ...Read more

Banking
Open Banking data proves superior to screen scraping, Frollo study reveals
Frollo, a leading Open Banking provider in Australia, has published a study demonstrating the superior quality of data obtained through Open Banking compared to traditional screen scraping methods, ...Read more

Banking
Bendigo Bank named most trusted bank in Australia for 10th consecutive quarter
Bendigo Bank has retained its position as Australia's most trusted bank, according to the latest trust rankings released by research firm Roy Morgan. Read more

Banking
Account-to-account and instant payments set to reshape global payments landscape
A new report from Capgemini predicts that instant payments will account for 22% of all non-cash transactions globally by 2028, signaling a major shift in the payments industry. Read more

Banking
Powell's Jackson Hole speech to shape market expectations on rate cuts
All eyes are on Federal Reserve Chair Jerome Powell's upcoming speech at the Jackson Hole symposium, as investors anxiously await clues about the central bank's future rate decisions. Read more

Banking
Bendigo Bank economist forecasts stable rates for 2024, cuts in 2025
Bendigo Bank's Chief Economist David Robertson is maintaining his prediction that the Reserve Bank of Australia (RBA) will keep interest rates unchanged throughout 2024, with cuts likely to begin in ...Read more

Banking
Hawkish central bank expectations dampen market sentiment, boosting dollar
Recent economic data and central bank communications have dampened the market's appetite for risk assets, leading to a stronger US dollar and a pullback in commodities and equities, according to Ipek ...Read more

Banking
Bank of England expected to provide guidance on future rate cuts at today's MPC meeting
European and UK stocks are outperforming their US counterparts due to a combination of factors, including high valuations in the US, strong corporate earnings from European companies, and expectations ...Read more

Banking
Investors advised to prepare for central bank policy divergence, says deVere CEO
The Bank of England, European Central Bank (ECB), and US Federal Reserve are set to take different paths in their monetary policies, which will significantly impact investors around the world, ...Read more

Banking
Open Banking data proves superior to screen scraping, Frollo study reveals
Frollo, a leading Open Banking provider in Australia, has published a study demonstrating the superior quality of data obtained through Open Banking compared to traditional screen scraping methods, ...Read more