Big four could encounter price signalling accusations following potential rate cut

by Mackenzie McCarty08 Jan 2013

Australia’s major banks may be about to break their two-year habit of not passing on full RBA interest rate cuts – so long as they avoid ACCC directed accusations of price-signalling.

The big four are said to have already conducted boardroom-level discussions about cutting rates independently.

 Westpac, for example, is reportedly considering a rate cut by up to six basis points next month, irrespective of the RBA’s cash rate decision following its February 5 meeting. 

According to a Peach Home Loans spokesperson, if the rate cut happens, borrowers with an average $320,000 home loan could save $160 in a year – something which would suggest better competition in the mortgage sector.

However, Peach says there’s some concern surrounding the possibility of price-signalling accusations being made to ACCC as major banks “keep mum” regarding the possible interest rate changes.

But an ACCC spokesman says the likelihood of any such complaint being successful is slim.

“It has to be a private disclosure, which would be a per say breach. Publically stating it wouldn’t be a concern.”

The spokesman says that, while ACCC has can’t control who does or doesn’t complain, he doesn’t believe the major banks have acted inappropriately at this stage.

Analyst TS Lim of Bell-Potter Securities told that he’s expecting one of the big four banks to cut rates by March.

“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.”

Stephen Walters, an analyst at JP Morgan, says that the easing of global funding costs would enable banks to make out-of-cycle cuts to mortgage rates, even if the RBA wouldn’t in the coming months.

“This would ease financial conditions without the RBA having to adjust policy.”