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Banks go rogue on rates: Are they positioning to keep your cuts?

Think you’ll get a full rate cut? Banks appear to be positioning to hold some back.

Aussies have endured 20 months of bank mortgage interest rate hikes, in lockstep with the Reserve Bank's (RBA) moves but how will the banks respond when - as is widely expected - the central bank starts cutting rates?

Whenever the RBA hiked by 25 basis points, our mortgages went up by the same. When it hiked by 50 points – ditto.

While some lenders have most recently hiked by less (shout out to Bendigo Bank and its Express Home Loan, which increased by only 0.5 of a basis point in November), others are quietly loading their loans with more.

The movements appear designed to either look more attractive to new borrowers or to make it appear they will have passed on a full rate cut when it eventually comes.

Composite image of the logos of Big Four banks Westpac, ANZ, NAB, CBA, interest rates.
Borrowers shouldn't assume lenders will pass on the RBA's interest rate cuts in full. (Getty)

Which lenders have done what

December and January have seen some maverick moves, with competitive pressures easing and a lower-than-expected inflation reading suggesting a possible peak in the interest rate cycle.

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For example, Auswide Bank hiked its headline variable rate in both of those months, despite no rate hikes from the RBA.

A spokesperson for Auswide told Yahoo Finance: "New Home Loan rate changes are made for a number of reasons by banks, such as reflecting cost of funds, risk, competitive position and growth appetite."

Its basic home loan started at 5.89 per cent and was lifted by 10 basis points in December to 5.99 per cent, and then another 10 basis points last month to 6.09 per cent. The offset account product went up by 15 points a pop.

Also by Nicole Pedersen-McKinnon:

ANZ also increased rates for its Simplicity PLUS basic loan by 10 points, which now starts from 6.54 per cent. And ING nudged its range of variable options higher by 5 points. Both basic and offset loans begin at 6.19 per cent.

“The key message to consumers and mortgage holders is, 'Keep an eye on what your lender is doing with headline variable rates' because, despite a pause in the cash rate hiking cycle, lenders are making hikes here and there,” Rachel Wastell, PR and communications manager at Mozo, said.

Cynically, it seems as though banks with lower rates might be making small ticks upwards so that, when the first RBA cut does come, they aren't singled out for not delivering it in full. Other lenders are owning the extra interest, upping theirs by more than the RBA’s 25 basis points shortly after.

The previous equal-market-leader among home loans with real offset accounts, The Capricornia, increased its rate by 30 points in November to 5.99 per cent (now the same as Northern Inland Credit Union).

The table below shows Australia’s cheapest loans, noting that choosing a lender with a real offset account is the only way to make sure any extra money you put against your loan is protected.

Table of Australia's cheapest home loans with real offset accounts and their interest rates
(Source: Mozo/Nicole Pedersen-McKinnon)

The Capricornia’s move handed the top-loan title to Tiimely, formerly Tic:Toc, which passed on the standard 25 basis points to 5.94 per cent. Bendigo’s competitive play saw it jump to second place. Qantas Money – also with a 25-basis-point increase – holds fifth place at 6.03 per cent.

The hikes (and holds) go wider too

Bear in mind that data houses like Mozo can only track the rates for new borrowers, so there may well be moves against existing borrowers that haven’t yet been revealed. It is not unprecedented - particularly for smaller lenders - to add extra (under the table) to their existing mortgages after an RBA rise or even outside of one.

But there is also a level of decoupling from the RBA’s official rate across other financial products. ING chose to give up the “highest in market” savings rate status and hold back a little interest on its Orange Everyday product late last year. This was in favour of boosting term-deposit rates, in response – it said – to increased demand.

But a previous market leader, MOVE Bank, cut its savings rate by 20 basis points on the first of this month (it briefly paid 5.7 per cent).

Now ING, MOVE and the Target Saver account from a raft of building societies and banks, are the equal-best, anyone-can-access accounts, at 5.5 per cent.

Credit card interest rates – though they have virtually not budged for decades – are also being pushed higher at the moment. NAB has just become the third of the Big Four to move rates.

And if you have any 0 per cent finance with Latitude Finance Australia’s GO Mastercard and Gem Visa - which offers up to five years interest-free if you buy from Harvey Norman, Domayne, Joyce Mayne and a host of other retailers - the interest rate afterwards has been raised 3 percentage points to a huge 29.99 per cent.

For many institutions, repositioning for rate cuts seems to mean repricing. Watch them closely.

Nicole Pedersen-McKinnon is the author of How to Get Mortgage-Free Like Me, available atwww.nicolessmartmoney.com. Follow Nicole on Facebook, Twitter and Instagram.

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