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Retirees benefit from no rate cuts

08/12/2011

Savers with bank deposits stand to benefit from any move by the big four banks not to pass on in full this week's 25 basis point cut in official interest rates to home mortgage holders.

Analysts said one consequence of a reduced cut would be a transfer of wealth from mortgagees to retirees, because banks will consider keeping some of the cut to borrowers to pay those with money to lend, analysts said.

One analyst calculated that for every five basis points banks did not pass on to home owners from the rate cut, $400 million of the $1.2 trillion in mortgages in the banking system would be transferred from home owners via the banks to the providers of funds, increasingly deposit account holders.

Shane Oliver from AMP Capital called chances of the big banks passing on the full 25 basis points "a big if".

Source: The Age



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