Smaller banks pile pressure on big four
Yesterday, ME Bank and Bank of Queensland moved quickly on rates, passing on the full RBA rate cut - which now sees the official cash rate at 4.25 per cent - to their respective borrowers.
This is putting pressure on the majors to follow suit and pass on the full 25 basis points delivered by the RBA yesterday.
"As part of our commitment to looking after customers over the long term and offering a fairer banking alternative, ME Bank has decided to pass on the full 0.25 per cent p.a. reduction to our customers," ME Bank's chief executive Jamie McPhee said.
These two second tier lenders have effectively thrown down the gauntlet to their major competitors, challenging them to step up to the plate and cut rates.
There has been widespread speculation that the majors may opt not to pass on the full RBA rate cut.
Last month, all four majors moved on rates within 24 hours of the RBA's rate announcement.
This month however, the majors have remained silent more than 12 hours on.
National Australia Bank was the only major not to pass on the full rate cut in November. While the other lenders may like to follow suit this month, ME Bank and BoQ's rate decision has made it incredibly difficult for the majors to withhold some of the rate cut, especially given the current competitive lending environment and the lenders' growing desire for market share.
Treasurer Wayne Swan is placing further pressure on the majors, yesterday stating that there is no "justification for the banks not to pass on the rate cut".
"Families and small businesses will be very angry if there is not a full pass through of this rate cut," he said.
What exactly the majors choose to do remains to be seen.