BoQ makes measly cut following RBA decision

 

Bank of Queensland has emerged as one of the stingiest banks in the latest round of interest rate cuts.

It will pass on only a 10 basis point cut to its variable rate for borrowers making principal and interest repayments. The changes will take effect from Friday October 25.

Customers making interest-only repayments will have their variable rates cut by the full 25 basis points. Earlier this week, Suncorp announced it would reduce all variable home loan interest rates by 15 basis points after the Reserve Bank of Australia on Tuesday cut the official cash rate by 25 basis points to a record low of 0.75 per cent.

"This is a decision BOQ has carefully considered, balancing the needs of our customers in this historically low interest rate environment," BoQ group executive of retail banking Lyn McGrath said on Friday.

"The changes ... will offer repayment relief to all of BOQ's home lending customers, with a view to helping more Australian families own their own home sooner."

Borrowers at BoQ subsidiary Virgin Money making interest and principal repayments will get a 15 basis point rate cut from October 25, while those making interest-only repayments will receive a 20 basis point cut.

 

RateCity CEO Paul Marshall. Source: Supplied.
RateCity CEO Paul Marshall. Source: Supplied.

 

Online financial comparison website RateCity said banks on average dropped interest rates by 17 basis points.

"With the cash rate now below one per cent, banks are cautiously considering what to pass onto home loan customers, while still appeasing shareholders and savers," RateCity's chief executive Paul Marshall said.

In its Financial Stability Review Report for October, released on Friday, the RBA highlighted that major banks have "ample ­access" to funding sources at a lower cost than a year ago, and confront less profit pressure from falling deposit rates than banks in other markets.

"Australian banks currently have ample access to a range of funding sources, and at lower cost than a year ago," the report said.

The RBA acknowledged that bank profits had declined, partly due to the huge compensation charges stemming from the Hayne royal commission and ­annual housing credit growth plummeting to record low levels.

But it also pointed out that the banks were in a better position on their deposit books than their international peers and interest rate hedges provided some protection. "Most deposits in Australia currently receive interest well in excess of zero, so the extent of pressure on margins from these deposits will be smaller than in many other countries," the RBA said.

ING also announced on Friday it was cutting home loan interest rates by 15 basis points from October 16.

And Bendigo and Adelaide Bank said it will also reduce all variable home loan interest rates by 15 basis points, effective October 25.

Banking heavyweights CBA, NAB, ANZ and Westpac were widely criticised for only passing on reduction of between 13 basis points and 16 basis points to borrowers.

Mr Marshall said customers should call, email or even tweet their banks into action if they were yet to reveal their hand on rates. "So far, a vast majority of lenders are passing on cuts of (15 basis points) or less, which would likely be a disappointment to their loyal customers," he said.