Big banks stand to pocket millions by withholding RBA rates from customers

Banks stand to pocket around $21 million dollars by withholding rate cuts.

Big banks stand to pocket millions by withholding RBA rates from customers

Just when you thought banks couldn’t get any greedier they, well, get greedier. You won’t believe how much money they will pocket by withholding lower rates from their customers.

It’s not the first time and it certainly won’t be the last.

According to data supplied by, banks stand to make a combined $21 million simply through delaying the passing on of the Reserve Bank of Australia’s (RBA) rate cuts that were announced on Tuesday 3 May.

By withholding the lower rates from customers, banks can make a combined $1.25 million each day. So, they’ve already profited from the two days it has taken them to announce that they will pass on the cuts. Then there’s the period between when they say they’ll pass on the cuts and when the lower rates actually take effect.

For example, Westpac has announced that it will pass on the full .25 per cent cut from 23 May – that’ll net them over $8 million in interest on repayments over the next fortnight. NAB will also lower its rate by .25 per cent, which will kick in on 16 May – but the delay will pull in around $3 million. Commonwealth Bank (CBA) will also pass on the full reduction on 20 May and will reel in about $7.7 million for this 17-day delay.


The only bank of ‘the big four’ that isn’t passing on the full rate reduction is ANZ, but at least it’s rolling out its .19 per cent reduction on 13 May, but still, it will have collected an extra $2 million in profits by that time.

The big four banks combined have 750,000 home loan customers, all of whom will miss out on an average of $26 each day the banks delay passing on the lower interest rate. It’s no surprise then that many Australians are more than peeved and are accusing the banks of profiteering.

Once the lower rates are passed on, repayments on a mortgage of $300,000 would be $535.56 less each year; a mortgage of $500,000 would cost $892.56 less; repayments on a $750,000 mortgage would be $1,338.84 less and those on a $1 million loan would be $1785.12 less per year.

Interestingly, if interest rates go up, banks waste no time in passing those increases on to the customer. Makes one wonder why there isn’t some kind of anti-corruption watchdog that can monitor instances such as these. Maybe someone should look into that

In the meantime, for retirees who will lose income due to the RBA rate cuts, finding a better deal on outstanding home loans may help to partially compensate for such income losses. RateCity Money Editor Sally Tindall says there’s currently some very good rates on offer from lenders around Australia. Currently, the big four banks home loan rates are between 5.35 per cent and 5.43 per cent.

“Regardless of whether your bank cuts rates or not, it’s also worth seeing what other lenders are offering, because ultimately the lower the comparison rate, the more money you’ll have left in your pocket,” said Ms Tindall. “There are plenty of lenders already offering rates below 4 per cent for owner-occupiers, so if you’re on a rate above 4.5 per cent, the chances are you’ll still be behind, even if you do get a cut.”

So, if you’re trying to discharge your mortgage before you retire, or if you’re still paying off a mortgage in retirement, it may be well worthwhile checking out the deals on offer from other lenders. After all, every cent counts, and the sooner you’re in the black the sooner you can kick back.



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    6th May 2016
    The RBA's cut I interest rates is all well and good for BORROWERS, but what about Aged Pensioners with their money in "safe" (HA!) options, like term deposits? The inflation rate is currently approx. 2.2% and predicted to be about 2.8% in twelve months. You might as well put your notes on a nail in the dunny.
    6th May 2016
    :-) :-) :-) The Polymer Notes slip out of Your Hand :-( :-(

    6th May 2016
    I hope the banks don"t put the mortgages down at all I prefer interest rates to go up but having a couple of deposit accounts and bank shares you might say I am a bit biased
    6th May 2016
    Liberalism...Free market...Democracy...who are the winners?
    6th May 2016
    And Winner is.... Not Sydney ! :-(
    Tom Tank
    6th May 2016
    Don't look now Malcolm and Scott but the Banks are proving yet again that a Royal Commission is sorely needed.
    6th May 2016
    Good theory but lots of assumptions have been made here.
    6th May 2016
    10/10 for that one Bon :-)
    7th May 2016
    It is not a good theory Bonny. Leon should know better. Glenn Stevens had no choice if he was to stop the rise of the Aussie dollar and a run of hot money flowing in. It is the currency wars.

    Our banks still need to borrow funds from off shore lenders and the big four all have declining ROE so the interest they have to pay is not going down.The dividends they pay will if they don't watch out and so mo interest rate fall for borrowers.

    They still are making good money but you have to wonder how much longer that will be the case.

    6th May 2016
    Since time immemorial, banks have adjusted interest rates at the end of the month they move downwards but the day after when they move upwards. They have always claimed that it is an "accounting problem". Of course, the opposite method is used for investments that aren't locked in.

    Banks are making huge profits for one good reason and it has little to do with fees and interest. In the 90's, all banks shed staff in areas where they could use consultants. Managers disappeared and were replaced by so called Senior Managers who are responsible for a number of branches and customers can no longer just wander in and apply for a loan. Banks now use mortgage brokers to do the work carried out by employees trained in lending. This alone has created enormous problems for some sections of the community.

    Mortgage brokers live on commission so it is obviously in their interest to write as many loans as they can to create a living wage. We hear of people who have been granted loans which it has not been possible to repay on their income so maybe their broker altered the original figures to get the loan approved. There is also a trailing commission on a lot of these loans which means that the lending institutions are paying a commission for years after the loan is eastablished to the broker. Let me correct that; the lending institution is charging the customer an extra interest rate to pay the broker.

    Another problem that has been shown is when applying for a loan, the broker assures the applicant that the loan they have found is exactly what suits their needs but it just so happens that the broker needs some cash and the lender they are using pays the highest commission. This commission is added to the loan rate.

    We see banks that used to be staffed by a large number of people now being run by 3 or 4 and if you have a problem, they need to 'phone another area to get the matter resolved. Not only are banks making obscene profits because of a huge reduction in staffing but the service to the customer has suffered to the point of non-existence. To add to the customers' woes, any problem that involves a 'phone call or reference to another person usually involves a fee which in no way resembles the actual cost of what has been done.
    6th May 2016
    It works on the same Principal as Petrol Pricing...Up Immediately ! :-( but Down in the fullness of Time :-(

    6th May 2016
    I do not feel sorry for fellow pensioners who have put their money into term deposits, these have been a total waste of time for many years. Perhaps if they actually spoke with a none bank financial adviser they would find out what will be a good investment.
    To those who want higher interest rates just for their own reasons, I sadly had a mortgage when interest rates were at 18% on borrowings back in the 1980's. Yes those who hand term deposits etc did very nicely thank you, but those of us with mortgages lived hand to mouth until the interest rates started to come down.
    Many over 50's say their children/grand children have a hard time getting into the housing market, house prices are at what the market will pay, interest rates are low, affordability of borrowing money is at a high.
    You cannot have high interest rates and affordable housing.
    Not Senile Yet!
    7th May 2016
    Our Banks are Regulated ....meaning they answer to the Government!!!
    The sad fact is that OUR Governments are responsible for allowing the Banks to do as they Please.......example being their unwillingness to have a Royal Commission look into the Banks more recent Corruption from within and shady Deals!!!
    But please remember just one thing....You the Voter .....Yes You the Voter!!!!....have been in charge of who you put into Parliament!!!
    So why do you ALL keep voting for the Party Puppets????
    You know they have to do what their Party Tells you know that they are Corrupt for selling out to their Parties to get in!!!! Yet you still give them your Vote....WHY??????
    To get a different Result...first YOU have change what you do to get a different result.....this is a known fact!!!!!
    So go on.....change what you do!!!!
    7th May 2016
    :-) :-) :-) I think your too late NSY They have sold just about Everything and Signed all the FREE TRADE DEALS ! :-(
    7th May 2016
    And PAID the UN to Take control of the Country and Thermostat !! :-)
    8th May 2016
    Banks have been using reserve bank interest lag ever since reserve banks were invented. Banks are not regulated to pass on changes in interest rates or even to pass on interest rate cuts by central banks. If you have a contract for a bank loan having a variable interest rate, the bank can change that on a wim. Read your contract. It tells you that quite clearly. Banks are a law unto themselves and until we get a royal commission into their dealings, there is little chance of there being any meaningful change. Governments are simply not game and if the ALP think they will get a Royal Commission into banks off the ground, I can tell you they lack the intestinal fortitude to do so. They're previous gutlessness on many other issues like the Super Tax, Refugees, Carbon Tax and many other imperatives further supports that view.
    ex PS
    11th May 2016
    The banks are a business and like the current government their main concern is with their major investors, these are the people who buy shares and expect a healthy dividend, not the people who park their savings in accounts.
    Don't expect the government to do anything about the banks, they have shown their displeasure of how the banks are treating us by moving in the last Budget to having them declared small businesses so that they can qualify for a Tax cut on profits rung out of their customers.