Warning over banks denying $91 mortgage relief as rate cut looms: ‘It's your right'

Yahoo

20-05-2025

Mortgage holders are being urged not to 'sit back and cop it' if their bank doesn't pass on impending interest rate cuts. The Reserve Bank of Australia (RBA) is widely expected to cut the cash rate at its Tuesday meeting, with economists and markets pointing to a 25 basis point cut.
Banks, including the Big Four, were quick to pass on the February rate cut to customers in full and experts believe they will follow the same pattern should there be a cut today. A 25 basis point cut would lower repayments by $91 a month on the average $600,000 loan with 25 years remaining.
Canstar data insights director Sally Tindall told Yahoo Finance she expects the 'majority' of lenders will pass on a cut in full to variable customers, with several banks already cutting fixed rates ahead of the meeting.
RELATED
Sign RBA has to make 50 basis interest rate cut: 'Unnecessary pain'
Commonwealth Bank boss pours cold water on supersized $181 RBA interest rate cut
Centrelink issues urgent Age Pension eligibility change warning: 'Double check''That's certainly what they should do, because the banks know better than most just how tough it has been for these customers over the last couple of years as higher rates and a higher cost of living have put pressure on their household budgets,' she said.
'In February, the vast majority of lenders chose to pass the RBA cut on in full, however, Virgin Money chose not to and its variable rate customers understandably responded in anger.'
Mozo banking and rates expert Peter Marshall also thinks lenders will largely pass on the whole cut if one happens on Tuesday and they will act quickly.
'There's been increased scrutiny of the behaviour of a range of businesses, mostly banks and supermarkets, as part of the cost of living issue so I think banks will be reluctant to do anything to attract unnecessary media attention,' he told Yahoo Finance.
While the majority of lenders are expected to pass on a cut, there's always a risk some could follow Virgin Money's lead and deny mortgage holders relief.
Tindall and Marshall both urged homeowners not to take this lying down and to hunt around for a better deal.
'Should any lender opt to keep part of an RBA cut for themselves, customers should know they do not have to sit back and cop it,' Tindall said.
'If you're on a variable rate, it's your right to pick up your mortgage and take it to a lender willing to offer you a better deal.'
Marshall urged customers to keep a close eye out for when their bank announces its reaction and be ready to find a better offer if they don't pass on the full cut.
"It's also anticipated that banks would similarly pass on any rate reductions to their savings account customers, leading to lower returns for depositors, so again, be ready to shop around for more competitive rates so you can get the best possible return on your money,' he said.
Tindall noted that borrowers no longer had to pay mortgage exit fees, but may face a state mortgage discharge fee, state government fees and potentially an upfront fee from their new lender, which may be negotiable.
'While this might seem like a stumbling block, these fees typically range between $1,000 and $1,500 in total and what many refinancers find is that they make this money back through fewer interest charges in a matter of months,' Tindall said.
Commonwealth Bank, Westpac and ANZ are expecting three interest rate cuts are on the cards for the rest of the rate-cutting cycle.
NAB has gone against the pack and expects five cuts, with May expected to be a supersized 50 basis point cut.
Tindall told Yahoo Finance that banks might not be as generous with future rate cuts in the cycle.
'If we see a total of three, potentially four or five more rate cuts in the cycle then yes, it's quite possible lenders will stop passing on full rate cuts to their variable customers and you don't need to look too far back in history for evidence of this kind of decision making by the banks,' she said.
The RBA has cut the cash rate 11 times over the last 10 years, including February's rate cut.
Of those, only five were passed on in full by CBA, NAB and ANZ, with Westpac only passing on three in full.
In comparison, the Big Four banks have passed on all 13 of the RBA's interest rate hikes since 2022 in full.Sign in to access your portfolio