Banks warn Aussies of shock rate cut twist that could hit homeowners hard

Daily Mail​

04-07-2025

Even if the Reserve Bank delivers a rate cut next week, homeowners can't expect to receive the benefits in full, an expert has warned.
Australia's four biggest banks are all expecting another interest rate cut from the RBA's decision due before July 8, which would bring the cash rate to 3.6 per cent.
After four years of persistently high interest rates, lenders were eager to pass on rate relief in full - but almost no major lender did so in either February or May.
But, according to Mozo finance expert Rachel Wastell, fewer lenders are likely to follow suit as interest rates keep easing.
'Borrowers can't afford to assume their bank will do the right thing, and borrowers should watch their lender like a hawk, especially if their rate starts with a six,' Ms Wastell told Daily Mail Australia.
She cited the rate-cutting cycle in 2019 as an example, noting that in June, more than half of lenders passed on the full 25 basis point cut.
Just a month later, in July, only 15 per cent did the same. By October, the share of lenders who passed on the full cut dropped to just nine per cent.
A similar pattern played out during the pandemic, when only 13 per cent of lenders tracked by Mozo chose not to pass on the first emergency cut in March 2020.
The second cut, however, was 'barely reflected' in home loan rates, with ANZ as the only major lender to even partially act on the cut.
'We've seen that banks tend to be generous early on, often with the first cut, but then start holding back as they try to protect margins,' Ms Wastell said.
She warned borrowers there was no excuse for complacency.
'If your rate still starts with a six after two RBA cuts, it's time to move,' she said.
'Looking back historically at past cutting cycles, lenders are less likely to pass on subsequent cuts.'
Since March, the number of lenders offering owner-occupier loans below six per cent tracked by Mozo has risen from 71 to 85.
Of owner-occupier loans, paying interest and principal across all loan-to-value ratios, 18 currently offer fixed rates below five per cent.
Graham Cooke, head of consumer research at Finder, agreed that lenders tend to drop off as easing cycles wear on but said ongoing cost-of-living pressures could force lenders to cough up.
'What's been really interesting this rate cycle is that all lenders who have passed on the cut have done it in full, twice. This is unprecedented, and likely a result of societal pressure due to the cost of living crisis,' Mr Cooke said.
He said the usual trend will likely play out assuming the rate cuts continue for long enough, but lenders would be well-advised to pass on any relief in the near term.
'So - the banks are unlikely to continue passing on the full cut if the cuts continue, but I think there is still so much focus on the cost of living that banks are unlikely to start doing that this month,' he said.
'If there is a fourth cut, however, banks may start to hold back a little.'