RBA Makes the Cut — But Banks Don’t Pass It On Fully

The Reserve Bank of Australia (RBA) recently lowered its benchmark rate — a move widely expected and welcomed by homeowners. But the reaction from Australia’s major banks has been tepid at best. While some lenders passed on the cut to new variable-rate borrowers, many withheld the full reduction from existing customers.

The result? Borrowers who should have seen relief aren’t getting the full benefit of central bank action.

And here’s the kicker: this trend could have implications for Canadian borrowers, especially as the Bank of Canada prepares for potential easing later this year.

Why Are Banks Doing This?

Australian lenders, like their Canadian counterparts, are facing:

Margin pressures from rising funding costs
Regulatory scrutiny that affects lending limits
Incentives to hold back rate relief and preserve profits on legacy loans

Even as new borrowers are courted with attractive introductory rates, existing homeowners are often left paying higher-than-market rates — unless they actively negotiate or refinance.

👥 Borrower Type	🏦 Bank Behaviour	📉 Rate Cut Passed Through
New mortgage applicants	Attractive promo rates offered to win new business	Full cut (0.20%–0.25%)
Renewing customers (same lender)	Less competitive offers unless negotiated	Partial cut (0.10%–0.15%)
Variable-rate holders	Rate reduction often delayed or reduced	Delayed cut (0.05%–0.10%)
Auto-renew clients / inactive	Typically kept on higher legacy rates	Minimal or no cut (0%–0.05%)

📉 Rate Pass-Through by Major Australian Banks – 2024–2025

Bank A – New

0.25%

Bank A – Existing

0.13%

Bank B – New

0.28%

Bank B – Existing

0.14%

Bank C – New

0.21%

Bank C – Existing

0.11%

Source: Mortgage.Expert analysis, simulated lender data

What Canadian Borrowers Can Learn From This

If the Bank of Canada begins cutting rates in late 2025 — as many economists predict — Canadians should not assume lenders will automatically pass on the savings.

Key takeaways for Canadians:

Watch for two-tier pricing: banks may offer better rates only to new customers
Use renewal as leverage: switching lenders may be the only way to benefit
Variable-rate holders should verify pass-through clauses in contracts
Monitor promo offers: brokers may get better deals than banks publish online

📞 Don’t Miss Out on Rate Relief

As global rates begin to drop, some lenders are quietly holding back savings. A mortgage broker can help you find the lenders offering real rate relief — not just marketing promises.

Let a Broker Shop for You

Final Thought

Australia’s experience is a cautionary tale. When central banks cut rates, borrowers expect relief. But in today’s profit-sensitive lending environment, that relief isn’t guaranteed — especially if you’re a loyal customer.

Canadian homeowners should prepare to shop around, compare offers, and demand better. Because if you wait for your lender to lower your rate automatically, you may be waiting a very long time.