Borrowers don’t pay more when banks hold back on rate cuts
Posted on Thursday, December 06 2012 at 2:55 PM
The Australian Bankers’ Association (ABA) has leapt to the defence of lenders who don’t pass on official rate cuts in full, claiming it makes no difference.
Steven Münchenberg, the group’s chief executive, says comments by the Reserve
Bank of Australia (RBA) confirm borrowers don’t pay more when banks hold back
on rate cuts.
“Once more, the RBA has made this point clear.
Mortgage rates today are broadly where they would be, regardless of whether
banks pass on rate cuts in full or not.”
He points to comments made Wednesday by the RBA’s Deputy
Governor Philip Lowe, who says banks’ funding costs have risen relative to the
cash rate.
“As we’ve noted many times, the Board of the RBA has
taken account of this in its monthly policy decisions,” Lowe told a business
conference.
“As a result, the cash rate today is around one and a
half percentage points lower than it otherwise would have been. The fact that
the Bank has offset the effect of higher funding costs on lending rates means
that the normal level of the cash rate is lower than it otherwise would have
been.”
Münchenberg believes it’s
“fallacious” to conclude that borrowers pay more when lenders don’t pass on
cuts in full.
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