Image: Treasurer Josh Frydenberg (Source: Twitter)
Image: Treasurer Josh Frydenberg (Source: Twitter)
Treasurer Josh Frydenberg has slammed the big four for not passing on the rate cut in full, as smaller lenders seize the moment.
None of the big four banks have passed on the most recent RBA rate cut in full, and the Treasurer isn’t happy about it, calling on borrowers to switch lenders.
“We continue to put pressure on the banks and ultimately it is the customers who can vote with their feet and go to their bank, seek the best possible deal and if not, take the business elsewhere,” Mr Frydenberg told ABC’s 7:30 .
“It is a pattern of behaviour by the banks. When the previous government was in, there were 14 rate cuts and only five were passed in full.
“The banks have a lot of explaining to do. People should shop around, get the best deal and make their displeasure known to their banks.”
The decision not to pass on the rate cut in full will sting borrowers of the big four, who make up 75% of the residential mortgage market according to UBS market share data.
Which lenders have passed on the rate cut in full?
Mr Frydenberg praised some of the smaller lenders for passing on the full rate cut.
“Five of the smaller lenders have passed on the rate cuts in full. So, the big banks may have thumbed their nose at their customers but some of the smaller lenders have actually done the right thing.”
Athena, Homestar Finance, and UBank (which is owned by NAB) are among the few lenders to agree to pass on each of the last three cash rate cuts in full to new and existing variable home loan customers.
Notably, both Athena and Homestar Finance are non-bank lenders.
The table below displays some of the sharpest variable home loan rates currently on offer across the big four banks, the top 10 customer-owned institutions and the larger non-banks:
Base criteria of: a $400,000 loan amount, variable, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. If products listed have an LVR <80%, they will be clearly identified in the product name along with the specific LVR. The product and rate must be clearly published on the Product Provider’s web site. Introductory rate products were not considered for selection. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term. Rates correct as at 01 June 2020. View disclaimer.
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James Austin, Chief Financial Officer of non-bank lender Firstmac, told Savings.com.au last month the bigger non-bank lenders are in a better position to pass on rate cuts because they fund off wholesale markets, allowing them to be more efficient with their cost bases.
ANZ did pass on the full 25 basis points for people paying interest-only (IO) home loans.
Investor loans seemed to benefit the most from the rate cuts, with Commonwealth Bank passing on the full 25 basis point cut to investors on variable loans paying IO.
Meanwhile, NAB passed on a 30 basis point cut to investors on variable loans paying IO.
Customer-owned banks struggle to pass on cuts
So far, customer-owned banks appear to have struggled to pass on the most recent rate cut to home loan customers.
At the time of writing, only four customer-owned banks have publicly announced they will be passing on at least some of the cut: Qudos Bank, P&N, Newcastle Permanent and Bank Australia.
The award for stingiest rate cut so far goes to Bank Australia which announced it will only cut by 10 basis points.
The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:
- The big four banks are: ANZ, CBA, NAB and Westpac
- The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2019. They are (in descending order): Credit Union Australia, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
- The larger non-bank lenders are those who (in 2019) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.
In the interests of full disclosure, Savings.com.au and loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.
*The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.
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