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ISCOVER
Staff Reporter
Australia’s big four banks have charged home owners an additional $18 billion by not mirroring the Reserve Bank’s official cash rate movements over the last five years.
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According to new data by RateCity, the gap between the official cash rate and the benchmark standard variable rate – the average rate of the major four banks ANZ, Commonwealth Bank, NAB and Westpac – has almost doubled since October 2007.
The benchmark standard variable rate was 182 basis points above the cash rate in October 2007.
Since then, it has gradually increased to 337 basis points above the cash rate.
RateCity spokesperson Michelle Hutchison said higher funding costs, greater competition for deposits and slow credit growth mean borrowers need to be prepared for more out of cycle rate movements as lenders look to offset funding pressures and maintain profits.
“The new normal for variable rate home loans is that you’re not likely to receive the entire cash rate movements and you will probably be hit with small hikes out of cycle over your loan term,” she said.
“While they may be small amounts each time, the extra costs you will be charged can add up to thousands of dollars.”
According to RateCity, borrowers with a typical $300,000 home loan paid an extra $11,687 in interest over the past five years, from major banks not passing on the full rate cuts.
