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.
