Borrowers miss out on $7 billion from Big Four: Finder

Comparison website Finder claims that banks have held onto an estimated $7 billion in the past three years by not passing on full Reserve Bank cash rate cuts.

According to Finder, since November 2011, ANZ, Commonwealth Bank, NAB and Westpac have been able to keep the sum from borrowers by failing to pass along full rate cuts on their variable rate loans.

Finder arrived at the sum by taking the average of the four banks' total home loans financed per month since November 2011, and the difference between the interest earned per month based on their average standard variable rates and how much they would have earned if they passed on the full rate cuts. Finder then subtracted 30% from that sum as an estimate for the proportion of fixed home loans, using its research that estimates 70% of Australian mortgage holders have a variable loan.

NAB has failed to pass along rate drops more than any of the other three banks in that period, Finder claims. According to their research, NAB held back 0.46 percentage points of the 2.50 percentage points cut by the Reserve Bank since November 2011.

Westpac, though it's held back only 0.34 percentage points in that time, has the highest standard variable rate of the big four banks, at 5.70% from 20 February.

Commonwealth will offer 5.65% on its equivalent product from the same date, while ANZ and NAB will have the lowest rates of the big four at 5.63%, which will be offered from 12 February and 20 February respectively.

According to Michelle Hutchison, Finder money expert, the big four banks' actions will affect most Australian mortgage holders.

"The big four banks hold 84% of home loan market share of all banks monitored by the Australian Prudential Regulation Authority (APRA)," says Hutchison.

"For a $300,000 home loan, borrowers could be missing out on $70 per month, $840 per year or over $25,000 over 30 years, based on the average 0.37 percentage points that the big four banks have kept from their customers."

"The big banks are making record profits from their customers because many borrowers are not bothering to compare their home loan to other lenders. While some prefer to pay more for to bank with the one organisation, it's a hefty cost for a little convenience."

Of the four banks, Commonwealth Bank has the largest market share in terms of value of loans.