Following yesterday’s cut to official cash rates by 0.25% to 3%, the RBA has said that there was no reason why the banks could not pass on the full cut to mortgage holders.

This morning National Australia Bank (ASX: NAB) announced that it was cutting rates by just 0.2%. The bank stated that the reason for holding back some of the cut was that deposit and wholesale funding costs remain high, resulting from instability in the global economy and low confidence domestically. Bank of Queensland (ASX: BOQ) has also cut its rates by 0.2%.

That statement flies in the face of ING Direct’s comments. Yesterday, ING cut its mortgage rates by the full 0.25%, announcing that its funding position has eased.

Australian Bankers Association CEO Steve Munchenberg had earlier told ABC TV that the big four banks were holding back their decisions because they are desperately wishing their competitors would show their hand first so they can undercut. ANZ Bank (ASX: ANZ) has changed its rate review date to the middle of the month, so ANZ customers won’t find out their cuts – if any, until next week.

Shadow treasurer Joe Hockey has said that there is less pressure on the banks to pass on the whole cut, because of reduced competition in the sector.  He added that the banks had ignored more than 55 calls by the government to pass on the full cut to customers.

The Reserve Bank has calculations that show the banks were in a better cost position that they were in October – the last time the RBA cut rates. At the time, Commonwealth Bank (ASX: CBA), ANZ and NAB passed on 0.2% of the 0.25% cut, while Westpac (ASX: WBC) only passed on 0.18%.

RBA governor, Glenn Stevens said in a statement that Australian banks had no difficulty accessing funding.

The Foolish bottom line

Given the 0.2% cuts by Bank of Queensland and NAB so far, it appears likely that the other banks will pass on a similar amount to customers. We have yet to see how much the banks will cut their deposit rates by, if any, although there seems to be more pressure on them to maintain higher deposit rates – good news for retirees and those with large cash deposits. Of course it also makes investing in shares that pay dividends that much more enticing.

If you only invest in one company this year, make it our “Top Stock for 2012-13.” Operating in two hot markets — one set to double by 2012, the other predicted to grow 5x over the next five years — this stock is a solid growth play that also boasts strong recurring revenue, zero debt, and lots of cash. Get its name and full research case in this brand-new FREE report.

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Motley Fool writer/analyst Mike King doesn’t own shares in any company mentioned. The Motley Fool’s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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