Customers are losing faith with the big four banks – and that was before they found out the lenders weren’t sharing the benefits of the RBA rate cuts.
With the economy barely registering a pulse, the Reserve Bank of Australia slashed rates for the second time in as many months on Tuesday. And the government followed up with its own dose of monetary medicine two days later.
But the banks have undermined the effectiveness of that stimulus, by choosing not to pass on the full 0.5 per cent rate cut.
- So, why aren’t the banks passing on the rate? Find out more here
ANZ was the only major bank to pass on the full 0.25 cut this month, after earning a clip round the ear from Treasurer Josh Frydenberg for not doing so in June.
Commonwealth and NAB cut rates by 0.19 per cent, after passing on the previous cut in full, and Westpac passed on a second 0.20 per cent cut.
That means none of the big four banks passed on the full 0.5 per cent.
ING did slightly better than the big four, by cutting mortgage rates by 0.45 per cent. And smaller lenders Athena, Greater Bank, Homestar, loans.com.au and Newcastle Permanent passed on the rate cuts in full.
The practice of delaying and passing on partial cuts to customers has earned the big four banks an extra $3.8 billion since 2016, according to a recent analysis by comparison site Mozo.
Which is perhaps at least partly why Roy Morgan found that the average satisfaction of home loan customers at the big four banks in May was 71.1 per cent – far lower than the 88.9 per cent and 86.2 per cent achieved by best performers ING and Bendigo Bank respectively.
Roy Morgan’s Norman Morris told The New Daily customer satisfaction rates had been falling since as far back as 2015 – and took a big hit after the banking royal commission.
“Customers are happier with everything at the smaller banks,” Mr Morris said.
“The customer service thing is more deeply ingrained in the culture.”
Finder insights manager Graham Cooke said the difference in customer satisfaction was partly because the smaller banks offered more competitive mortgage and savings rates, and partly because they had more innovative products.
“For example, if you wanted a decent ongoing savings rate, the big four banks are not where you would look,” Mr Cooke told The New Daily.
“There’s a lot of flexibility with debit cards as well… the smaller banks will refund the money if you use any ATM at all. So if you use an ATM in your local pub or local RSL, they’ll refund that money.”
He added that the big four banks only offered good savings rates if customers agreed to forfeit everyday access to their money, whereas ING, ME Bank and other smaller players offered savings accounts with higher rates and greater flexibility.
“If you were in the marketing and product design departments of the big four banks, you’d really be wanting to be keeping an ear to the ground,” Mr Cooke said.
“If the big players don’t adapt soon, it won’t be long before they look like dinosaurs.”
However, RateCity.com.au research director Sally Tindall said that not all customers wanted the same thing from a bank.
“Some people want the lowest cost products available, while others love the idea of being able to sit down with their branch manager and have a chat about their finances,” she told The New Daily.
“When selecting a bank, it’s worth writing down what you’re looking for from your bank and [listing] them in order of priority.
“Compare prices and fees, read reviews, test out their customer service and have a good look through their website to make sure it is easy to understand and use.”