Lenders drag heels with rate cuts
BANKS have acted promptly to pass on cuts to savings accounts but many have dragged their heels on passing on mortgage decreases. Find the best deals now.
The Reserve Bank of Australia slashed the cash rate to a record low of 1.25 per cent more than two weeks ago and since then 31 financial institutions announced cuts to their saving interest rates.
Of these, 28 banks have already passed these on with an average cut of 0.22 percentage points.
But on the flip side lenders have been slower in passing on rate cuts to mortgage customers. Financial comparison website RateCity found more than 88 lenders announced mortgage decreases but about half of these are taking three weeks or more to pass on the drop and reduce the costs to borrowers.
RateCity's spokeswoman Sally Tindall said some banks were delaying passing on the mortgage cuts so they could continue to charge customers higher charges.
"CBA did the right thing to pass on the full rate cut but to take three weeks for it to happen puts a dampener on the party," she said.
"Some lenders are even stretching it and taking months to pass on the cut and as late as August."
CBA will pass on the 0.25 percentage point cut on Tuesday, three weeks after the June 4 rate decision, while smaller lender Bank of us is waiting 59 days to pass it on, reducing variable rates on August 1.
Other lenders who are slow in passing on the cut and will move in the coming days include Bankwest, ING, ME and Teachers Mutual Bank.
Ms Tindall also said some lenders are punishing loyal customers, by passing on a rate cut immediately to new customers but delaying passing on the reduction to existing customers.
Mortgage firm Finsure groups' managing director John Kolenda urged borrowers to take action "whenever there's an interest rate movement".
"Consumers should be looking into what they are paying and what's in the market," he said.
"It's the best time to evaluate your position and make sure you are on a competitive deal."
He said variable home loan borrowers should be paying a rate in the low to mid three per cent range.
But borrowers should expect more cuts, with many economists tipping another RBA drop in July or August.
Top savings accounts
• Ubank, Usaver Ultra, 2.87 per cent.
• RAMS saver account, 2.8 per cent.
• Australian Unity Active Saver, 2.8 per cent.
Top variable home loans
• Reduce Home Loans, Low Rider, 3.09 per cent.
• Mortgage House, Blue Loan Prime, 3.14 per cent.
• Homestar Finance, Star Essentials, 3.24 per cent.
* Based on a $300,000, 30 year loan paying principal and interest.