Home Loan | Westpac Slow To Pass On Rate Cuts

February 9, 2012 – 8:01 am

Westpac home loan customers are still waiting – some up to four months – for the bank to pass on two pre-Christmas interest rate cuts. The bank says it is ”an opportunity for the customer to get ahead by paying more than they need to”.

Customers at Australia’s second-biggest bank were told last month new lower repayments would start in March, well after the November 14 and December 19 dates on which the bank says its lower rates became effective.

Has your bank delayed your rate cut? Contact mevans@smh.com.au

To pay the lower repayment before that date customers had to ring the bank and ask for it. A lag in passing on lower repayments allows the bank to raise money without having to borrow it from financial markets.

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Most economists expect a further 25 basis point cut when the RBA considers interest rates again tomorrow. Revelations about Westpac dragging its heels on reducing repayments will likely spark fresh calls for banks to pass on rate cuts in full.

Despite record profitability, banks are expected to resist passing on future rate cuts in full given their increased cost of funding. The RBA twice cut rates in the lead-up to Christmas in a bid to boost faltering consumer confidence amid concerns over global fallout from the European debt crisis.

The big four banks said they would pass on the savings to home loan customers within days or weeks. Some smaller banks promptly introduced the lower repayments.

But Westpac’s group executive of retail and business banking, Jason Yetton, wrote to customers on January 23, advising them of new repayment amounts, some starting on March 2, citing the RBA rate cut on November 1.

”This follows the recent adjustments in official cash rates by the Reserve Bank of Australia in November and December 2011 and other market

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