This month RBA decided to cut its cash rate by 25 basis points to 1.50 percent. Some valid reasons for these cuts include:
- The global economy is continuing to grow, at a lower than average pace.
- Australia’s terms of trade remain much lower than they had been in recent years.
- The underlying pace of China’s growth appears to be moderating.
- In Australia, recent data suggests that overall growth is continuing at a moderate pace, despite a very large decline in business investment.
- Recent data confirms that inflation remains quite low and this is expected to remain the case for some time.
- Supervisory measures have strengthened lending standards in the housing market.
- Growth in lending for housing purposes has slowed a little this year. All this suggests that the likelihood of lower interest rates exacerbating risks in the housing market has diminished.
The decision was made by the Big Banks to immediately pass on only part of the rate cuts to property borrowers, which was a very bold decision.
CBA – 0.13%
ANZ – 0.12%
NAB – 0.10%
WBC – 0.10% (Interest only loans) 0.14% (Principal and interest loans)
Big Banks all came with their own explanation (excuses) as to why they did not want to pass on the full rate cut to the property borrowers, such as:
- Consideration for the current environment and the needs of both borrowers and savers
- Increased funding costs and capital requirements
- Seek to balance the needs of customers and shareholders
Winners and losers
According to Clancy Yates report he points out that ‘Australia’s major banks stand to hang on to $917 million in combined profit by only giving mortgage customers roughly half the Reserve Bank interest rate cut, according to analyst estimates’.
In the same report by Clancy Yates, Victor German estimates the following bottom line gains:
- ANZ $165 million
- Commonwealth Bank: $262 million
- National Australia Bank: $226 million
- Westpac: $264 million
All this proves that the banks won this round. As consumers we need to take a stance, we always have a choice whether to choose the Big Banks or not.
Loyalty towards your bank will always come at a cost to you unless you absolutely fully utilise their branch network and technology. I bet you don’t even know:
- What time your bank opens and closes
- Your bank manager’s name
- How many staff they have cut in the past 12 months
- If your branch is open over the weekend
- Whether you are getting the best possible rate
It’s time to take a long hard look at your own banking arrangements and make a decision to put yourself in the right direction. It’s never too late nor too hard to ditch the Big Banks.
Seeing as the banks usually look after themselves it’s now time that you take control and look after yourself! Check out LoanDolphin.com.au and let the banks and brokers bid to give you the best possible rate for your home loan. You could save thousands!
Disclaimer: This blog post has not taken into account your objectives, financial situation or needs. Due to this, before acting on any general advice/information in this communication, you should consider whether it is appropriate to your objectives, financial situation or needs.