Big banks have pocketed an extra $4.7 billion by not passing on full cuts

The RBA has shaved another 0.25% off the cash rate - the third time this year it’s done so - and all attention has turned to home loan lenders to see how they’ll respond. Among the big four banks, CommBank and NAB have already announced cuts of 0.13% and 0.15%, respectively.

But how likely are the rest of the big banks to pass on the full cut? If we consider how much they’ve saved by withholding some of the cut in previous months, we’d advise against getting your hopes up. 

Since 2016, ANZ, CommBank, NAB and Westpac have collected approximately $167 million per month in additional revenue by withholding part of official rate cuts. That adds up to a staggering $4.7 billion in total.

“This year alone ANZ and Westpac have pocketed a $279 million annual windfall by holding back some of the official rate cuts, it’s easy to see why the other major might consider not passing the cut on in full,” said Mozo Director Kirsty Lamont.

“As well as holding back a portion of the official cut, the big banks all delayed the effective dates of their rate relief. A move that saw them collectively bank $434 million.”

How likely are banks to pass on the full cut?

Back in June, there was a lot of pressure on lenders to pass on the cut in full, and most followed through. Of the 76 providers in our database, 48 reduced variable rates by 0.25%.

But by July, that enthusiasm had started to dwindle. Just 13 lenders passed on the full amount following July’s cut, while 63 passed only part of it. Going forward, it’s likely we’ll see more of the same as banks’ net interest margins are squeezed tighter and tighter.

“It’s clear the big banks’ are under pressure. Faced with record low interest rates and higher cost structures than their more agile online competitors, it could soon make it uneconomical to pass on any cuts to the cash rate,” Lamont says.

“With a potential fourth 25 basis point cut likely later this year or early 2020, the amount of money the big banks can earn in interest on loans compared to what they are paying to savers will get very tight.”

Online lenders are the ones to watch

While the big banks drag their feet or cut only small amounts, a handful of online lenders have wasted no time in passing on the full rate cut to their variable home loan customers. Athena Home Loans was first out the gate, announcing it would be offering owner occupiers rates as low as 2.84% p.a. (2.80% p.a. comparison rate*).

Homestar followed with cuts of its own, leaving its home loan line-up looking that much more impressive. Right now, the Homestar Star Essentials offers variable rates as low as 2.74% p.a. (2.77% p.a. comparison rate*).

As for Reduce Home Loans, it only passed on a portion of the cut (0.20%), but its range of variable rate home loans is looking sharper than ever. Its Low Rider home loan currently comes with a super low rate of 2.69% p.a. (2.71% p.a. comparison rate*), making it one of the best value home loans in our database.

“For years online lenders have been offering more competitive variable interest rates than our major banks and with more official rate cuts on the horizon the gap looks to widen even further,” said Lamont.

“If you are looking to reduce your loan repayments as soon as possible, it pays to compare rates and switch to the lender offering the most competitive rate you can find.”

So whether you’re looking to buy a home or refinance an existing home loan, now is a good time to be looking around. Browse the selection below, or head over to our home loan comparison page for an idea of the kinds of rates currently out there. 

And if you’re wondering how much of the cut your lender has passed on, be sure to check out our Naughty or Nice table, where we’ll be keeping track of lenders’ decisions as they come in.

Home loan comparisons on Mozo

Mozo may receive payment if you click the products below. We don’t compare the entire market, but you can search our database of 472 home loans using the filters below.
Last updated 13 July 2024 Important disclosures and comparison rate warning*
  • Basic Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.16 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Enjoy a low rate home loan with $0 application fee and $0 ongoing fees. Flexibility to split your loan and set different repayment types. Fee free redraw from your loan using online banking. Flexible ways to repay. 40% Deposit required.

  • Unloan Variable

    • Owner Occupier
    • LVR <80%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    5.90 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.

  • Offset Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.39 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Ability to open up to 10 offset accounts per loan account. Fast online application. Linked Debit Mastercard® with fee-free access at ATMs across Australia. Package a credit card with your home loan and the annual card fee will be waived (T&Cs apply). 40% deposit required.

  • Special Real Deal Home Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <80%
    Interest rate
    6.19 % p.a.
    Variable
    Comparison rate
    6.23 % p.a.
    Initial monthly repayment
    $3,059
    Go to site

    No application or service fees. Flexibility to choose your repayment schedule (weekly, fortnightly or monthly). Use multiple Everyday Accounts with 100% interest offset to pay your home loan off sooner.

  • Unloan Variable

    • Owner Occupier
    • LVR <80%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    5.90 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.

  • Express Home Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <90%
    Interest rate
    6.01 % p.a.
    Variable
    Comparison rate
    6.14 % p.a.
    Initial monthly repayment
    $3,001
    Go to site

    Get online approval from the award-winning Bendigo Bank Express Home Loan. Multiple offset accounts and redraw available. 100% offset on variable rate loans and partial offset on fixed rate. Flexible repayment options. New home loans only.

  • Basic Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.16 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Enjoy a low rate home loan with $0 application fee and $0 ongoing fees. Flexibility to split your loan and set different repayment types. Fee free redraw from your loan using online banking. Flexible ways to repay. 40% Deposit required.

  • Mortgage Simplifier

    • LVR<80%
    • Owner Occupier
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.17 % p.a.
    Initial monthly repayment
    $3,043

    Get a competitive variable rate with ING’s Mortgage Simplifier. Free extra repayments, no monthly or annual fees. Freedom to make free extra repayments or redraws.

  • Offset Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.39 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Ability to open up to 10 offset accounts per loan account. Fast online application. Linked Debit Mastercard® with fee-free access at ATMs across Australia. Package a credit card with your home loan and the annual card fee will be waived (T&Cs apply). 40% deposit required.

  • Special Real Deal Home Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <80%
    Interest rate
    6.19 % p.a.
    Variable
    Comparison rate
    6.23 % p.a.
    Initial monthly repayment
    $3,059
    Go to site

    No application or service fees. Flexibility to choose your repayment schedule (weekly, fortnightly or monthly). Use multiple Everyday Accounts with 100% interest offset to pay your home loan off sooner.

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* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

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