Borrowers left waiting 10.6 days for a partial rate cuts as banks assert market dominance

Borrowers left waiting 10.6 days for a partial rate cuts as banks assert market dominance
Borrowers left waiting 10.6 days for a partial rate cuts as banks assert market dominance

Banks' dominance of the mortgage market – now above 90%  of all home loan approvals – means they have been able to take 10.6 days to pass on RBA cash rate cuts.

By contrast, they take 6.8 days to lift mortgage rates when the RBA lifts the cash rate.

In addition, research suggests banks have passed on 116% of cash rate rises (above official rate increases), while only passing on 84% of the benefit of RBA cash rate cuts.

These figures are contained in the latest edition of the Economic Record, published the Economic Society of Australia, which calculated the time banks take based on the last two years of RBA cash rate decisions.

Westpac is the worst offender when it comes to passing on rate cuts – taking 13 days, while the Commonwealth Bank is the quickest to pass on rate rises – taking just three days.

How long banks take to pass on RBA rate rises and rate cuts (decisons from May 2010 to June 2012)


When rates rise

When rates fall




Commonwealth Bank









Big Four Average



Source: Economic Record/Sydney Morning Herald

Westpac is also the worst offender when it comes to the margin between the standard variable rate and the cash rate.

Westpac's margin is 352 basis points, followed by ANZ (339 basis points), Commonwealth Bank (326 basis points) and NAB (315 basis points).

However, borrowers will have themselves partly to blame if the major banks – as expected – do not pass on the full 25-basis-point October RBA rate cut this week.

The following chart prepared by investment firm Nomura shows that Australian banks' share of total mortgage approvals has risen well above 90% as borrowers choose to secure their home loans through well-known brands.

This is despite non-bank lenders, building societies and credit unions offering competitive and in many cases lower fixed and variable-rate offerings.

Click to enlarge



Banks' share of the mortgage market surged in the wake of the GFC from 80% of the market to more than 90% as non-bank lenders and mutuals were forced to ration their credit or in some cases stop lending all together.

Before this, the  major banks lost market share in the mid to late-1990s following the rise of the non-bank sector led by battler mortgage brands, including John Symond’s Aussie Home Loans, John Kinghorn’s Rams Home Loans and Mark Bouris’s Wizard Home Loans.

Aussie Home Loans is now a third owned by the Commonwealth Bank and is predominantly a mortgage broker.

Rams Home Loans had a disastrous float on the ASX, coinciding with the start of the GFC. Its brand and stores were snapped up by Westpac in October 2007 for a paltry $140 million – Rams had raised $695 million when it listed on the ASX in July 2007 at $2.50 a share. The former Rams mortgage book, now called RHG Limited, is now in run-off. Shares are trading at around 39¢.

Mark Bouris sold Wizard Home Loans to GE Money in 2004.

GE Money quit mortgage lending in 2008, as wholesale funding costs soared, leaving some borrowers high and dry, with some of the highest variable mortgage rates in the market as it refused to pass on big RBA cash rate cuts.

Aussie acquired the Wizard Home Loans brand and franchise network in December 2008.

All Wizard Home Loans stores are now branded Aussie.

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Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer


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