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Jessica Darnbrough
While it now seems less likely the Reserve Bank will cut interest rates again this year, it is also less likely the big four will pass on any RBA cuts in fulll.
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According to a recent strawpoll conducted by The Adviser, more than 70 per cent of industry respondents believe the major banks will not pass on any future rate cuts in full.
Of the 141 respondents, 70.2 per cent said they expected the majors to withhold part of any Reserve Bank cuts, while just 29.8 per cent disagreed.
Smartmove’s Simon Orbell is one broker who believes the majors would withhold at least part of any future cuts.
“What I would like to happen and what I expect to happen are two completely different things,” he said. “I believe the majors will pass on anywhere between 65 and 80 per cent of the RBA’s future rate cuts.
“While the banks have long spoken about the rising costs of funds, I think withholding part of the RBA’s rate cuts is just another way for the majors to create margin. When the banks first decided to move independently of the RBA, they copped a bit of flack. Today, however, it has become par for the course. They get away with it and will continue to get away with it,” he said.
Rate Detective Home Loans’ Warren Dworcan told The Adviser he would be “very surprised” to see all four majors pass on future RBA rate cuts in full.
“The banks constantly talk about margins and the costs of funds. When evidence mounts to suggest the costs of funds is falling, they throw another excuse at us,” he said – a sentiment with which Aussie’s Matthew Rogers strongly agrees.
Mr Rogers said because the majors are still complaining about tighter margins and high funding costs, borrowers are unlikely to see them pass on future rate cuts in full.
“It has been a long time since all of the big four passed on the RBA’s rate cuts in full, so I don’t expect them to change tactics any time soon,” he said.
