Big banks to feel the pressure with forecasted RBA rate cut

As anticipation continues to grow amongst Aussies awaiting the RBA announcement, speculations of a Melbourne Cup day rate cut are in the air. 

According to new Mozo research, should the RBA cut rates on Tuesday it’ll be the big banks who will feel the heat. 

Mozo found that the Big Four banks’ tactic of ‘slow and steady’ to pass on interest rate cuts in the past has seen them rake in big bucks. In fact, by delaying the effective dates the big banks profited $109 million this year alone. 

That figure then jumps to a staggering $1.2 billion if you consider when the RBA began cutting rates in 2011. 

“With so many mortgage customers under pressure, if we see another cut to official interest rates next week we need the banks to end their longstanding practice of profiteering at their customers’ expense,” said Mozo Director, Kirsty Lamont.  

“With the progressive winding back of Jobkeeper and Jobseeker support payments and the banks mortgage holidays coming to an end, it’s critical the banks pass on this latest cut without delay.”

However, these big players weren’t alone in their efforts, as Mozo found that 58 banks delayed the effective dates of their rate cuts after the first official RBA cut for the year in March.

A total of 69 lenders passed on the first rate cut in full back in March, while 12 only chose to pass on a partial cut.

Households set to save should the banks provide rate relief

While there's no way of telling how the RBA will choose to move come Tuesday, many experts are predicting the official cash rate will drop by 15 basis points. 

The average variable rate home loan in the Mozo database currently sits at 3.34%, bringing the monthly repayments for owner occupiers paying principal and interest to $1,761. 

Should lenders pass on this 15 basis points reduction, the new average variable rate will drop to just 3.19%, saving households $33 a month on their mortgage. 

And with budgets getting tighter in many households due to the COVID-19 pandemic, Lamont believes that the possibility for a lender to pass on the cut could be make or break for vulnerable Aussies. 

“With a number of the banks already indicating some customers won’t make it through the pandemic, their decision on whether or not to pass the rate cut could quite literally be the difference between keeping a roof over your head or being kicked out in the cold,” she said.

Where to find the best variable rates on the market

The good news is, households looking to save on their home loan don’t have to wait for their lender to pass on a rate cut. We took a peek into the Mozo database to source the top three variable rates offered on the market.

Leading Variable Interest Rates

Source: mozo.com.au as of 26 October 2020. Based on a $400,000 loan at 80% LVR for an Owner Occupier with Principal & Interest repayments.

You can compare more variable rates by visiting our home loan comparison tool or track any home loan rate movements over at our Reserve Bank interest rates page.