CHOICE calls on big four to face up to out-of-cycle rate cuts

Big four banks are major beneficiaries of increased mortgage debt in Australia and have room to move

With mortgage debt at a historic high, CHOICE is challenging Australia’s major banks to use their record profitability to pass on an out-of-cycle interest rate cut to consumers.

The consumer group’s call comes ahead of the monthly interest rate meeting for ANZ, which in December 2011, became the first of the big four to try and evade the Reserve Bank’s official monthly interest rate announcement by ‘decoupling’ its rates.

“Since ANZ launched their ‘decoupling’ strategy, it has been a one-way street for consumers, bringing interest rate rises out of cycle with the RBA, and clipping the ticket on rate cuts,” says CHOICE CEO Alan Kirkland.

“ANZ and the other big banks have been the major beneficiaries of our record mortgage debt, and it is no coincidence that their record profits have come at this time.”

CHOICE has published a new investigation revealing that Australia has some of the highest level of mortgage debt in the world:

  • In 1977, households had, on average, debt equal to one-third of an annual disposable income
  • In 1990 it had increased to nearly half
  • In 2013 it had risen to a staggering 148% of annual disposable income, equivalent to over four times the debt accrued in 1977.

While the RBA notes that households are able to service this increased debt, it concedes these high debt levels are leaving homeowners more vulnerable to possible economic shocks such as reduced economic growth and an increase in unemployment [1].

Meanwhile, banks have resisted lowering rates, citing wholesale funding and the increased cost of interest on deposits in the form of bank accounts and term deposits [2].

“Anyone with bank savings knows that the banks have had no hesitation about slashing the rates on deposits, and even with signs of wholesale funding costs easing, there is no respite for households with mortgages,” says Mr Kirkland.

“This is despite months of spin about interest rate movements. In fact, even the CEO of Commonwealth Bank has recently conceded that banks have room to cut rates outside of official movements [3].”

For our full investigation on Australian mortgage debt visit

CHOICE’s banking tips:

  • Ask your lender to match the best deal you can find. A 2010 CHOICE banking survey revealed about 60% of people who asked for a better deal on their home loan got it.
  • If your interest rate falls, leave your repayments unchanged and reduce your loan with no extra effort.
  • Move to fortnightly mortgage repayments.

Visit for more mortgage tips.

Total household debt


Big four banks’ share of loans

Comments from banking analysts:

“I think there is scope for further out-of-cycle cuts in at least some lending rates, if not the standard variable rate.” Stephen Kirchner, Research fellow at the Centre for Independent Studies.
“Out-of-cycle rate cuts and renewed competition are now inevitable. If the global economy continues to improve, funding markets keep rallying and deposit competition continues to ease, we believe banks will come under pressure to initiate out-of-cycle rate cut.”  Jonathan Mott, UBS bank analyst
“They won’t be aggressive when they cut outside the RBA’s movements but I think at least one of them will cut in February or March, which will really force the others to act in response.” TS Lim, Bell-Potter Securities analyst