National Australia Bank has become the first of the big four banks to react to yesterday's interest rate cut, but has stopped short of passing on the full 25 basis points.
This morning NAB cut its standard variable home loan rate by 20 basis points, matching yesterday's move by the Bank of Queensland.
The Reserve Bank reduced the official cash rate to 3 per cent yesterday - a level not seen since the global financial crisis - but the banks have indicated they may not be able to pass on the full rate cut.
Only ING Direct has so far decided to pass on the full 25 basis points cut, and Steven MÃ¼nchenberg from the Australian Bankers Association has played down expectations that other banks will follow that lead.
"Each of the banks have got different funding models - our larger banks in particular raise money offshore," he told ABC News 24.
"The banks will be looking at their funding costs, they will also be looking at the reaction from the community because that is an important consideration for the banks, and they'll balance those things out in making their decisions." The RBA's statement yesterday said that Australian banks have had "no difficultly accessing funding".
Treasurer Wayne Swan has welcomed the RBA's decision to cut interest rates, yesterday describing it as an "early Christmas present", and has demanded the big banks pass the rate cut on to customers.
"This rate cut should be passed on in full.
The banks are massively profitable, their net interest margins are healthy, and they are not under the funding pressure that they claim." But shadow treasurer Joe Hockey says no-one should be surprised if the banks continue to ignore the Government, arguing that Labor has warned the banks dozens of times to no avail.
And he says the RBA's decision signals troubling conditions ahead for the Australian economy.
"The Reserve Bank doesn't give interest rate cuts out as a Christmas present, I mean that just shows you how absurd Wayne Swan's lines are," he said.
"The bottom line is, the Reserve Bank cuts interest rates in this sort of situation when it believes that the economy is facing very significant headwinds." In 2011, the Government banned mortgage exit fees on all new home loans as part of a string of changes designed to boost competition in the sector.
Mr MÃ¼nchenberg says competition in the sector means banks often hold off announcing their response to RBA movements.
"[The banks] are literally sitting there at the moment, desperately wishing their competitors would show their hands first so that they can undercut them so that they can protect their market share," he said.
"I know it's frustrating - it's frustrating for me, it's frustrating for people waiting for the interest rate cut - but it is actually competition at work because each of those banks would like to be able to undercut their competitors." If the full value of yesterday's rate cut was passed on, customers would save about $50 per month on an average $300,000 loan.
But for self-funded retirees living off their savings, .
"We understand that there are people hanging out for the rate cut, but I think it's important to remember that only one in three households in Australia have a mortgage, and there are many savers out there who don't want to see rates cut any further because that's actually their income being cut," Mr MÃ¼nchenberg said.