Banks may not cut rates at all

The big banks may not cut mortgage rates at all as they shore up their profit margins in anticipation of a global credit freeze. The RBA on Tuesday trimmed the official rate to 4.25 per cent. Industry heavyweight Stephen Munchenberg has conceded that the banks “may hold part, or all” of the cut in the official interest rate as the global economic outlook deteriorates.

“There's a strong expectation the banks will follow the Reserve Bank either on the way up or on the way down but there are times – and this is one of them – when the cost of money diverges from the Reserve Bank's interest rates.”

Credit Suisse analyst James Ellis told Bloomberg the banks may withhold up to five-10 basis points of the 25-point cut.

“In the past, it has taken up to three days for the first mover on rates to emerge among the big four banks after a central bank adjustment,” Mr Ellis said.

Source: Herald Sun