Majors hold fire on interest rate cut

Australia’s major banks are unlikely to pass on the full 50 basis point rate cut to borrowers. Yesterday, the Reserve Bank cut the cash rate by 50 basis points to 3.75 per cent the biggest drop since the peak of the Global Financial Crisis and the lowest level since December 2009.

Within hours of yesterday’s announcement The Bank of Queensland confirmed that it would pass on 35 basis points of the rate cut to its borrowers.However, at close of business yesterday, all of the majors were yet to make announcements around their mortgage rates.
I expect the big banks to follow the lead of BoQ and hold back some of the rate reduction. This is a very big move from the Reserve Bank and it will help thousands of households, with people on a $300,000 mortgage potentially saving around $1,000 per year.

But it’s unlikely that all lenders will pass on the full 50 basis point rate cut. The signals from the big four banks suggest that they will try to hold on to part of this rate cut,  remember that of the 50 basis point cash rate reduction from the RBA since November, the big four banks have only passed on around 40 basis points to variable rate home loan customers.



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