Brokers slam BOQ Group for not passing rate cut to all customers

The decision comes despite the brands acknowledging the impact on customers and “current high cost of living pressures”.

BOQ Specialist has said it regularly reviews savings and home loans rates to ensure they “balance the needs of savers and borrowers and are competitive in the market”.

But despite this, the bank’s mortgage interest rates will remain unchanged this month, “realigning previously discounted rates to current market rates”, the bank said in a statement.

Explaining the decision not to cut rates on BOQ Specialist mortgages, the lender said: “BOQ Specialist has given careful consideration to balancing customer interests, market rates, and funding costs.

“As a challenger brand, BOQ Specialist has historically offered lower than market rates to stand out against larger competitors. The highly competitive home lending market has improved rates for customers, while recent industry-wide margin compression has required smaller banks to consider the sustainability of returns to ensure customers have continued access to lending.

“The decision to realign rates with those of our competitors ensures that we can continue to support BOQ Specialist customers effectively. We understand that this impacts some customers, especially given the current high cost of living pressures.”

However, BOQ Specialist commercial lending clients have seen their interest rates drop by 25 bps.

Similarly, Virgin Money has also said that variable home loan rates for new and existing loans would remain unchanged following the RBA’s February cash rate change.

Virgin Money also cited previously discounted rates as part of its decision not to reduce rates further and issued a virtually identical statement as BOQ Specialist to justify its decision.

Despite Virgin Money and BOQ Specialist not passing on the rate cut, other brands within the BOQ Group are following a different strategy.

Non-major bank BOQ, which no longer operates through the broker channel for home loans, reduced variable home loan interest rates by 0.25 per cent per annum for new and existing customers on 7 March.

ME Bank reduced variable home loan interest rates by 0.25 per cent per annum for new and existing customers on 8 March 2025.

BOQ Group faces broker backlash

While some brokers have acknowledged that lenders may need to protect margins in order to remain competitive, others have said that failure to pass on rates could damage their reputation.

Kapil Virmani, mortgage director at South Australia-based brokerage Think Mortgage, acknowledged that different lenders have different funding sources and strategies and need to “balance how much they pay depositors (like savings account holders) and how much they lend to borrowers”.

He said: “Banks get their money from different sources, not just the Reserve Bank. Some of these sources haven’t become cheaper, so to protect their profits and cover costs, they hold back part of the cut.

“[S]maller banks need to keep strong financial buffers and manage risks carefully, especially with rising global uncertainty.”

He suggested that BOQ Specialist may have higher cost of funds and a niche, professional client base, which means it needs to protect margins, while Virgin Money – which has more of a digital banking growth strategy focused on deposits – may need to preserve margins in a competitive environment.

But other brokers have spoken out against Virgin Money and BOQ Specialist regarding their failure to pass on the RBA rate cut.

Craig Parry, a senior mortgage broker and partner at South Australia-based brokerage Crown Money, said: “Borrowers should receive the full benefit. The RBA cuts rates to ease financial pressure, and lenders withholding savings prioritise profits over customers.

“Failing to pass on rate cuts keeps people in debt longer. Borrowers already struggle with rising costs, and higher repayments make financial progress slower.”

He said that this was because borrowers would pay more interest than necessary, while higher repayments would reduce their ability to save, invest, or pay down debt faster.

“Transparency is key. Borrowers expect fair treatment, and withholding savings reinforces distrust in the banking system,” he said.

“A competitive mortgage market depends on fair pricing. If some lenders pass on cuts while others don’t, it distorts the market and pushes borrowers to seek refinancing.”

Parry urged borrowers to consider refinancing with lenders that pass on savings.

“Brokers will see more demand for refinancing. Borrowers will actively seek better deals from lenders that pass on rate cuts in full,” he said, noting that the move could erode trust and see customers moving their business to institutions that “genuinely prioritise their financial well-being”.

Nathan Smith, director and broker at Sydney-based brokerage Birdie Wealth, told The Adviser: “Lenders should pass on the rate cut; not doing so indicates to us they are closed for business and will not look after the customers we entrust with them.”

He said that the move could also impact BOQ Specialist and Virgin Money market share as it could make brokers “reluctant” to recommend these lenders in the future.

“And, from a client perspective their reputation is tarnished with plenty of negative feedback given online,” the NSW-based broker said.

Steven Tropoulos, mortgage broker and group director at Highfield Private, echoed this sentiment, telling The Adviser: “In today’s highly competitive mortgage market, it is more crucial than ever for lenders to pass on rate cuts in full. Failing to do so can have profound implications – not only for borrowers but also for lenders’ competitive positioning in the marketplace.

“As widely reported, cost-of-living pressures continue to weigh heavily on many Australian borrowers. Those who don’t receive the full benefit of rate reductions are more likely to look elsewhere for better deals by refinancing to a lender that offers more attractive terms.

“This significantly increases the risk of customer attrition, as borrowers seek out competitive rate reductions to ease their financial burden. Over time, this behaviour erodes the market share of lenders who fail to keep pace with rate cuts, leaving them scrambling to retain customers by ultimately offering the full rate cut, or even more in the end.”

Tropoulos said that lenders that refused to pass on lower rates could lose customers in the long run.

“Lenders like Virgin Money Australia and BOQ Specialist, who have not consistently passed on rate cuts, are becoming less appealing to borrowers, especially when compared to competitors such as Macquarie and MyState, who have been proactive in reducing rates,” Tropoulos said.

“As this pricing gap widens, it becomes more difficult for those lenders who fail to reduce rates to compete effectively in the market. The longer they delay or fail to pass on rate cuts, the more their customer base will shrink as borrowers gravitate toward lenders offering better value.”

Tropoulos said that lenders’ decision to leave rates unchanged could impact their reputations with brokers.

“From a broker’s standpoint, our role is to act in the best interests of our clients, ensuring that they receive the most competitive loan options available. Recommending a lender that maintains higher rates while others provide more affordable alternatives would not align with our fiduciary duty. Brokers need to be motivated to ensure clients secure the best deals, and lenders who fail to pass on rate reductions risk losing their place in the broker channel,” he said.

“Ultimately, the market will self-correct as borrowers and brokers naturally shift toward lenders that remain competitive on pricing. Lenders who consistently withhold rate reductions may find themselves on the losing side of market share erosion. The lesson is clear: to stay relevant and competitive, lenders must adapt to market conditions and pass on rate cuts in full. Failure to do so could ultimately result in diminished market presence and a weakened position in the eyes of borrowers and brokers alike.”

[Related: Lenders confirm they will pass through rate cuts]