Commonwealth Bank and NAB have quickly announced they will pass on the Reserve Bank's cash rate cut in full to its customers, suggesting they had little choice following the reputational damage that followed a series of scandals.
While ANZ responded to the RBA's 0.25 percentage point cut with a 0.18 basis point reduction to its variable rate home loans, Commonwealth and NAB said they would go further as they rebuild amid the fallout of last year's financial services royal commission.
"We have carefully considered the RBA rate decision and the current funding environment, together with how we continue to meet our regulatory commitments, capital requirements, and community expectations," CBA retail boss Angus Sullivan said.
NAB chief customer officer Mike Baird said the 0.25 per cent rate reduction would save owner-occupiers making payments on a $400,000 home loan about $744 a year.
""We strongly believe reducing rates is the right thing to do by our customers and reflects our focus on earning trust in the community and rewarding our loyal existing customers," Mr Baird said.
The RBA on Tuesday cut the cash rate by 0.25 percentage points to a record low 1.25 per cent.
ANZ was first major to respond in a move similar to that by big banks following the previous RBA cut in August 2016, when they reduced variable rates by an average 0.13 percentage points and pocketed the rest.
About an hour later, CBA said it would pass on the full RBA cut - albeit only from June 25.
NAB said it would pass on the rate cuts from June 14 on all of its loans aside from its First Home Buyer special rate of 3.49 per annum announced last week.
Prior to Tuesday, just half the 12 RBA cuts since November 2011 were passed on in full - or within 0.01 percentage points of full - by the major banks.
"Today's (RBA) move will directly benefit those with variable rate mortgages as long as the banks pass on the cut," said Kate Howitt, portfolio manager at Fidelity International.
ANZ retail boss Mark Hand acknowledged that many would have hoped to benefit from the full cut, but said the bank also had other considerations.
"While we recognise some home loan customers will be disappointed, in making this decision we have needed to balance the increased cost in managing our business with our desire to provide customers with the most competitive lending and deposit rates possible."
Sally Tindall, research director at comparison site RateCity, said big banks should now face renewed competition for customers with some smaller lenders already agreeing to pass on the full cut to customers.
"ANZ's decision to not pass on today's cut in full is a huge disappointment and now all eyes will on the remaining big banks to see if they can go one better," Ms Tindall said.
Westpac had yet to respond to the RBA's well-telegraphed and long-expected move.
