Changes are happening - please bear with us while we update our site.

Changes are happening - please bear with us while we update our site.

Oh Dear, CBA, Westpac & NAB Won’t Pass On The Full Interest Rate Cut

Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC) and National Australia Bank Ltd (ASX: NAB) will not pass the full RBA rate cut to borrowers.

Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC) and National Australia Bank Ltd (ASX: NAB) will not pass the full RBA interest rate cut to borrowers.

What Happened?

The Reserve Bank of Australia is Australia’s central bank. One of its biggest roles is to decide Australia’s ‘official’ interest rate, taking into account economic conditions including unemployment, inflation and the housing market. The RBA interest rate has a ripple effect across the whole economy because it means debt (like mortgages) get cheaper or more expensive.

Interest Rates Cut… Again

Yesterday, the RBA made the decision to cut the official interest rate to 1.00% from 1.25%.

It’s worth noting that interest rates are down from 7% just 10 years ago and over 15% in the 90s.

In response to this week’s cut, the CBA has said it will reduce its owner-occupied principal and interest standard variable rate home loan by 0.19% — not the full 0.25%, thus withholding 0.06% of the rate cut.

However, CBA said the full rate cut will be passed to interest only variable rate loans, possibly because these borrowers would, in theory, be more likely to spend the money saved and stimulate the economy.

Westpac will cut rates on its variable home loans by 0.2% for owner occupier customers and 0.3% for interest-only customers. These changes will come into effect on 16th July.

NAB will cut rates on variable rate home loans by 0.19%, the same as CBA. NAB and CBA both passed the previous rate cut in full to borrowers, while Westpac passed on 0.2%.

What About ANZ?

Australia and New Zealand Banking Group (ASX: ANZ) has set itself apart by passing on the full rate cut of 0.25% to all of its variable interest rate loan customers.

However, ANZ is not ahead of the other banks, as they only passed on 0.18% of last month’s rate cut.

What Does All This Mean?

The fact that the banks are not passing on the full rate cut suggests that their profit margins are really starting to feel the pressure. It’s also interesting that CBA and Westpac chose to pass the full rate cut (or more than the full cut for Westpac) to their interest-only customers.

This would suggest that interest-only investor loans have slowed which may not be a good sign for the property market.

The inability to pass on the full rate cut may also make the RBA think twice about cutting rates further. If the banks can’t pass on the rate cuts, there would be little effect on the economy.

If you’re looking for dividend shares to beat the low rate environment, have a look at the companies in the free report below.

[ls_content_block id=”14945″ para=”paragraphs”]

Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.

$50,000 per year in passive income from shares? Yes, please!

With interest rates UP, now could be one of the best times to start earning passive income from a portfolio. Imagine earning 4%, 5% — or more — in dividend passive income from the best shares, LICs, or ETFs… it’s like magic.

So how do the best investors do it?

Chief Investment Officer Owen Rask has just released his brand new passive income report. Owen has outlined 10 of his favourite ETFs and shares to watch, his rules for passive income investing, why he would buy ETFs before LICs and more.

You can INSTANTLY access Owen’s report for FREE by CLICKING HERE NOW and creating a 100% FREE Rask Account.

(Psst. By creating a free Rask account, you’ll also get access to 15+ online courses, 1,000+ podcasts, invites to events, a weekly value investing newsletter and more!)

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian owned.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

Skip to content