“If you’re not happy with your lender, then I encourage you to look for a better deal” … Treasurer Wayne Swan.THREE of the country’s biggest banks have thumbed their noses at the federal government, denying borrowers the full value of this week’s cut in official interest rates.

Commonwealth Bank, Westpac and NAB yesterday sparked fresh criticism from the Treasurer, Wayne Swan, when they lowered their standard variable mortgages by less than Tuesday’s 0.25 percentage point cut in official rates.

Ending a three-day standoff in which the government pressured the banks to pass on the official cut in full, CommBank and NAB said they would reduce their mortgage rates by 0.20 percentage points, to 6.6 per cent and 6.58 per cent, respectively. Westpac announced a cut of 0.18 percentage points, to 6.71 per cent.

While the banks said that their decisions balanced the needs of borrowers with those of savers and shareholders, The Treasurer urged disgruntled customers to shop around. ”If you’re not happy with your lender, then I encourage you to look for a better deal,” Mr Swan said.

ANZ Bank will revise its mortgage rate on Friday, in keeping with its go-it-alone pricing strategy, which seeks to break the link in consumers’ minds between official rate moves and the rates charged by the commercial banks. In the past two months ANZ has left rates unchanged without mention of higher costs.

When the Reserve Bank cut official interest rates to 3.25 per cent on Tuesday, it said the banks were having ”no difficulty” in accessing funds, after a recent lift in financial market confidence.

However, banks argue they are paying customers more for deposits, which is pressuring profits.

NAB’s executive for personal banking, Lisa Gray, said the decision was ”not taken lightly” and the bank ”had sought to strike the right balance” between offering the lowest standard variable rate of the big four and ”our obligations to ensure Australian banks are safe and secure”.

”The increased competition for deposits is pushing up costs, making it more expensive to fund our lending,” Ms Gray said.

The shadow treasurer, Joe Hockey, who is promising a sweeping review of the financial system if the Coalition wins government, said there was a need for ”real” competition in banking.

On figures from RateCity, the cheapest mortgages are more than 1 percentage point lower than the those offered by the big four banks.

However, the big banks often cut standard variable mortgages by 0.7 percentage points or more for customers who also sign up for a package which may include credit cards or other accounts.

Yesterday’s moves come after an academic study reported in the Herald this week said banks were faster to pass on interest rate rises than cuts in the two decades to last year.

While the big banks wear much of the criticism for failing to pass on rate cuts in full, new analysis suggests their smaller rivals have been just as likely to withhold interest rate cuts in the past year.

Before yesterday’s moves, the average mortgage rate reduction in the past year for building societies and credit unions had been similar to the reduction for the big four, figures from Canstar show.

A senior financial analyst at Canstar, Mitchell Watson, said this suggested the big banks were under pressure to remain competitive with smaller rivals.

”The big banks had the rub of the green in terms of customer growth during the global financial crisis. Now they need to fight a bit harder to retain and win new business,” he said.

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