Rates Are Cut - Who's Ripping You Off?

This week, for the first time in almost three years, the Reserve Bank of Australia announced an official cut to the cash rate of 0.25% to a new record low 1.25%.

A welcome change for homeowners who have been suffering in the housing downturn for the last five years.

And there’s more to come with the Reserve Bank Governor Philip Lowe having previously telegraphed the bank’s position in a speech to the business community, with another rate cut likely later in the year.

Mr Lowe, in the same speech, called for any official rate cut to be passed on in full to retail banking customers – a first for a sitting RBA governor.

So all eyes were on the banks, the big four mainly, waiting for them to pull their triggers and see if they had learned anything from the last two years of intense public, government and royal commission scrutiny.

Seems they haven’t, two of them at least.

ANZ were the first out of the blocks, announcing a generous 0.18% reduction in variable rates, opting to keep 0.07% to themselves.

The nation’s biggest bad bank, the CBA, surprisingly, used all their powered announcing they were cutting rates by the full 0.25% while NAB joined them on the same day.

Wednesday, it was the turn of Westpac, who after seeing the vitriol that was launched at ANZ the day before, and the lead from the CBA & NAB, decided bafflingly that they’d also be a little greedy and keep 0.05% for their executive bonuses and pass on just 0.20%.

That sound bad? It actually gets worse when you know what’s happened to bank interest rates over the last 6-12 months.

There’s this thing called the BBSW – the Bank Bill Swap Rate. It’s the internal banking interest rate that the bank’s themselves charge and pay when borrowing money between themselves. Essentially it’s the cost of the money they buy before tacking on their margin and selling it to you as a borrower.

The BBSW has fallen.

Previously every lender had opted to increase rates across the board over the last 18 months as the BBSW increased. But it’s now at back at 2017 levels. The difference between consumer rates now (before Tuesday’s rate cut) vs 2017 is in some cases 20 to 30 points.

The lenders were quite eager to put up their customer rates when their costs where higher, not so much when they came down.

And now, ANZ and Westpac are getting an every bigger kick by withholding part of the official cut this week.

It will be a big end of financial year season at ANZ and Westpac headquarters this year, with plenty more cash to help pay for those bonuses to those hard working executives – paid for by their customers.

If you’re an ANZ or Westpac customer, don’t be a stooge. Give us a call and we’ll help you end their ripoff.