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Borrow

Bank justifies refusal to pass on full rate cut

By Cameron Micallef · October 16 2019
Reading:
egg

Borrow

Bank justifies refusal to pass on full rate cut

By Cameron Micallef
October 16 2019
Reading:
egg
Full rate cut

Bank justifies refusal to pass on full rate cut

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By Cameron Micallef · October 16 2019
Reading:
egg
Full rate cut

One of the big four banks has hit back at an announcement that there will be an inquiry into the costs of mortgages, arguing that reduced margins would not be good for customers.

Westpac CEO Brian Hartzer has gone on the front foot, outlining why the bank is not putting profit ahead of customers in its refusal to pass on the full rate cut.

Instead, he argued it is protecting its credit rating.

According to the CEO, if the bank’s credit rating falls, the bank will have to pay more for credit, ultimately leading to higher costs for consumers.

“Westpac must also retain its double AA rating,” he offered.

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“This rating allows the bank to import funding at a more reasonable cost from international investors.”

“To lose it would increase the cost of our wholesale funding, which would inevitably lead to higher interest rates for our borrowers,” Mr Hartzer continued. 

Pricing decisions from the major banks are more complex than simply reducing the rate with the central bank, he explained.

The CEO said “pricing decisions require banks to take into account a number of factors, particularly as the cash rate heads towards zero. In particular, we have to manage the net interest margin – that is the difference between deposit and lending rates.”

Despite his perspective, Mr Hartzer welcomed the inquiry. 

“The inquiry is an important opportunity to put the facts on the table around mortgage pricing,” he said. 

The CEO noted that the banking giant “will actively participate in this inquiry and believe the Australian community will benefit from increased transparency”. 

A Commonwealth Bank spokesperson has also affirmed the stance towards an inquiry taken by Mr Hartzer. 

“The ACCC Inquiry invites the opportunity to gain a deeper understanding of how Australian banks are operating in a historically low interest rate environment,” the spokesperson said. 

“Achieving the right balance for borrowers and depositors is a constant challenge, and the inquiry provides an opportunity to bring transparency to these.”

 

Bank justifies refusal to pass on full rate cut
Full rate cut
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About the author

Cameron is a journalist for Momentum Media's nestegg. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leveraging their insights to grow your portfolio.

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About the author

Cameron is a journalist for Momentum Media's nestegg. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leveraging their insights to grow your portfolio.

Join The Nest Egg community

We Translate Complicated Financial Jargon Into Easy-To-Understand Information For Australians

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