Rate cuts: What will your bank pass on?

Commonwealth Bank of Australia (ASX: CBA) has passed on the full 0.25% cut

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This afternoon the Reserve Bank of Australia cut the official benchmark lending rate from 1.5% to 1.25% in Australia to mean the big banks will be able to borrow funds a little bit cheaper themselves.

Banks largely make profits by making more on what they lend than they pay on what they borrow, with the difference being their net interest margins as a key measure of profitability. 

As such they could theoretically afford to pass on the RBA's full 0.25% rate cut to variable rate home loan borrowers without any harm to their profitability.

However, if they chose not to pass the cut on in full it's likely because they're looking to gouge their customers for the sake of making higher profits. 

As such those banks that refuse to pass on the full cut get an understandably bad rap in not treating their customers fairly. 

So let's take a look at what amount different banks have passed on as at 17.00pm AEST.

Commonwealth Bank of Australia (ASX: CBA) has passed on the full 0.25% cut to variable rate borrowers.

National Australia Bank Ltd (ASX: NAB) has passed on the full 0.25% cut to variable rate borrowers.

Australia & New Zealand Bank (ASX: ANZ) has reportedly only passed on 0.18% and will have some excuses to make.

Westpac Banking Corp (ASX: WBC) is yet to make a decision and is probably waiting to see the reaction to ANZ's decision.

Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

A happy young couple lie on a wooden deck using a skateboard for a pillow.
Share Gainers

These were the best-performing ASX 200 shares in March

These shares made their shareholders smile in March thanks to some very big gains.

Read more »

Businessman using a digital tablet with a graphical chart, symbolising the stock market.
Opinions

2 ASX shares I have been buying in 2024!

I’m a believer in the long-term outlook of these stocks.

Read more »

Stock market chart in green with a rising arrow symbolising a rising share price.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a massive day for the ASX 200, with a new all-time high recorded.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Technology Shares

This ASX tech stock rocketed 60% in March! Can it keep on delivering?

After soaring in March, the ASX tech stock is now up 169% since this time last year.

Read more »

Broker Notes

Brokers name 3 ASX shares to buy now

Here's why brokers are feeling bullish about these three shares this week.

Read more »

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Share Fallers

Why Burgundy Diamond Mines, Clarity Pharmaceuticals, EML, and Zip are sinking today

These ASX shares are ending the week in the red. But why?

Read more »

A young women pumps her fists in excitement after seeing some good news on her laptop.
Share Gainers

Why Mesoblast, Newmont, Pilbara Minerals, and Platinum shares are jumping

These ASX shares are ending the week strongly. But why?

Read more »

a young boy dressed up in a business suit and tie has a cute grin and holds two fingers up.
Opinions

2 of my top ASX 200 shares to consider buying before April

I would happily exchange dollars for these two shares right now.

Read more »