Speaker
Right now, everyone's talking about interest rate cuts. Australia's big four banks, the ComBank, Westpac, NAB and ANZ are all predicting the Reserve Bank could start dropping rates as early as next month. CBA and Westpac are forecasting four rate cuts that could bring the cash rate down to 3.35% by the end of 2025. NAB thinks it could even lower and ANZ is probably a bit more conservative. First, let's look at what a rate cut could mean for you. Let's say you have a $500,000 mortgage. A 0.25% rate cut could mean you'd save $74 each month or $888 a year. And while this sounds like great news for home buyers, there is a catch. The banks don't actually have to pass on those rate cuts to you. So if the bank only passes on a 0.15% rate cut, your savings drops to only $44 a month. And over the life of your loan, this reduced savings could add thousands of extra dollars of interest on your loan. That comes from your pocket and not the bank's. And it's reasonable to think surely the banks don't pass on the rate cut, right? Well, history tells us that's not always the case. Did you know that in 2019 to 2020, the Reserve Bank slashed the rates by 1.4%, but the banks didn't pass on all of that to their borrowers? CBA cut by 0.82%, West Bank cut by 0.8%, now by 0.84%, and they did slightly better at 0.97%. This means that Aussie homeowners could have missed out on up to 0.6 worth of potential savings. Instead of that money going into your back pocket, it's paid all worth the banks. And these historic figures don't say ANZ is going to be the bank that's going to pass on the most because it depends on the standard variable rates at the time, the discounts that you have, but the big question right now is, will they pass on the full amount of rate cuts we might see this year?