Trending Financial News 9 July
Westpac pays compo to 40,000 customers
Westpac is refunding tens of thousands of customers who have been overcharged interest on their loans.
40,000 borrowers on interest-only loans were not transferred to principal and interest repayments once their interest-only period was up. Another 30,000 borrowers who were ahead on repayments will not be remediated.
The issue also affected borrowers at BankSA, Bank of Melbourne and St George Bank, all owned by Westpac.
Borrowers who were overpaid will be paid a direct credit to their home loan account or will be sent a cheque. The Westpac error affected home loans with an interest-only period that expired between 2009 and 2016.
Westpac’s Will Ranken told the Herald Sun that Westpac is trying to ensure “no customers pay more interest over the original loan term as a result of this error.”
Westpac says customers who think they might be affected by this error can call 1300 132 925.
Only five banks in Australia have passed on full 0.50% in rate cuts
Very few banks and other lenders have passed on the full amount of the Reserve Bank’s last two interest rate cuts totalling 0.50 percentage points. The Reserve Bank cut rates in June by 0.25 percentage points and again by the same amount in July with most lenders holding back some of the cuts from retail borrowers.
Commonwealth Bank and NAB have passed on 0.44 percentage points of rate cuts to variable mortgage borrowers. ANZ Bank have passed on 0.43 percentage points while Westpac have passed on 0.40 percentage points in the last two months.
Athena, Greater Bank, Homestar. Loans.com.au and Newcastle Permanent have passed on the full 0.50 percentage point rate cuts to new and existing borrowers.
Savers shielded from worst of cuts
There have been around 800 changes to bank deposit products monitored by Infochoice following the Reserve Bank’s 0.50 percentage point reduction in the official cash rate since early June.
The average interest rate cuts on everyday savings accounts is 0.20 percentage points to 0.25 percentage points on the maximum bonus rates. In many cases base rates on savings account already hover around zero.
A few banks with high base savings account rates have lowered these by the full 0.50 percentage points, including Westpac, AMP, BankVic and Horizon Credit Union.
Long term deposit rate cuts range from zero to huge
There have been 125 rate movements for five-year term deposits in the last five weeks. The median term deposit rate cut was 0.40 percentage points, though around twenty term deposit products have had rates hacked by 0.70 percentage points or more since the beginning of June.
Larger and regional banks have tended to keep TD rate reductions at the low end of the scale, ranging from 0.10 to 0.15 percentage points.
For a 5-year deposit, Bank First has the best rate currently with 2.45 per cent on offer.
On 3-year TDs RACQ Bank has rates set at 2.40 per cent pa.
Good news: Bank fees coming down
Analysts at Macquarie Bank are predicting that the big four Australian banks will have to continue to cut fees on retail banking products.
Macquarie says bank fee income will contract by $350 million in the next 12 months.
The Reserve Bank reported last month that total bank fee income from households fell 6.5 per cent to $4.19 billion last year.
Increasing competition for customers and a need to improve their public image following the Hayne Royal Commission into the banking sector are the key drivers of the falling fee revenue for banks said Macquarie.