Are Australia's banks playing ball with home loan interest cuts?
It came as a relief to most Australians with home loans and even business owners, when the RBA cut interest rates by a further 0.25 points on Tuesday to 3.00%.
Although the cash interest rate is now at it's lowest since the global financial crisis, the Australian Bankers Association has stated that banks may not be able to pass on a full rate cut due to a rise in the costs of funding.
Reserve Bank governor Glenn Stevens has claimed that the Australian banks have very little trouble in gaining funding from global markets. The Chamber of Commerce and Industry has also urged the big commercial banks to pass on rate cuts as soon as possible, according to ABC News.
The Bank of Queensland and ING Direct announced rate cuts almost instantly after the RBA decision, with another eight banks since then. However, despite quick reaction to announce rate cuts, customers may still have to wait a couple of weeks for these to come into effect, some as late as Christmas eve. Out of the 10 banks to already have announced rate cuts only two will be passing on a full cut of 0.25% basis points, namely ING Direct and MyRate.com.au.
The news is of course not celebrated by everyone and those with term deposits and savings accounts may see a cut to their Christmas budget as interest rates on their savings and investments begin to fall.
The best advice for Australians who are unhappy with their bank not passing on a full rate cut or those planning to buy, is to compare home loan providers and their products and seek out those offering the lowest interest rates. Likewise, term deposit and savings account holders should consider switching to providers that maintain the highest possible interest rate.