Banks slow to pass on rate cuts, quick to lift
Big banks have passed on official interest rate rises to their customers in less than half the time it takes them to deliver rate cuts, new figures show.
Since the global financial crisis struck in 2008, banks have taken an average of 10 days to pass on cuts in the cash rate to their home loan customers, according to research published by Credit Suisse.
In contrast, lenders took about four days when raising rates.
The figures, obtained from broker 1300HomeLoan, show that all the big four banks - Commonwealth Bank, Westpac, ANZ and National Australia Bank - engaged in the practice over the past five years.
Commonwealth Bank was quickest to pass on rate increases, with an average gap of 3.7 days between when the Reserve Bank raised rates and when the change took effect for customers.
Westpac-owned St George was the biggest laggard in lowering rates for customers, taking 15.5 days.
Credit Suisse analyst Jarrod Martin said the practice was of some help to bank profits, but it did not have a substantial impact. "When there are 365 days in the year it's not going to be significant in the scheme of things," Mr Martin said.
The Australian Bankers' Association chief executive, Steven Munchenberg, said the analysis only looked at one side of the banks' balance sheets.
"Banks typically announce changes to deposit rates around the same time as changes to lending rates, so any delay in changing lending rates also means savers are not seeing their rates changed immediately," Mr Munchenberg said.
"This also has a bearing on the implications of timing for banks' interest margins. While the Reserve Bank's cash rate is a significant influence on market rates, other influences come into play when banks set market interest rates, for example, banks' funding costs and competition from other financial service providers in the marketplace - just to name a couple."
Bank profits in the first half of this year have grown strongly despite weak demand for credit from households and business. Total earnings in the industry are tipped to hit $27 billion this year.
The practice of holding back on rate cuts has been estimated to make an extra $2 million a day for the Commonwealth Bank and Westpac, the nation's two biggest mortgage lenders.
The finding was contained in a detailed report on mortgage trends.