Call to cut rates

Today the board of the Reserve Bank of Australia (RBA) will meet for the first time this year. One of the decisions it is tasked with is to set the official cash rate. This should determine the rate which banks charge customers for lending money on credit cards, mortgages and personal loans.

With the economy perceived to be slowing, low retail sales and prices dropping in supermarkets, it is predicted that the board will again reduce rates by 25 basis points. This would normally filter down to consumers through a 0.25 per cent drop in bank interest rates, but borrowers shouldn’t hold their breath.

The indication from the big four banks is that they will make a business judgement on whether or not to pass on any rate cut in full, or at all. Falling profits, the increased cost of borrowing for banks and lending margins have all been quoted as deciding factors. Indeed, the Commonwealth Bank and ANZ now review their rates independently of any decision from the Reserve Bank.

So, while we await the decision from the Reserve Bank, Debbie asks, are the big banks being fair to borrowers?