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ANZ has given its mortgage holders no reason to expect it will pass on the Reserve Bank of Australia’s (RBA) interest rate cut, saying the cash rate has no effect on its funding costs.

None of the four major banks have reduced their variable home loan interest rates since Tuesday’s 25 basis point cut by the RBA, which took the cash rate 3.25 per cent, it’s lowest level in three years.

ANZ Australia chief executive Philip Chronican said the bank would stick to its 10-month old process of setting lending rates on the second Friday of each month.

"Our cost of funds doesn’t change on the first Tuesday of the month when the Reserve Bank moves its cash rate, we fund ourselves through a range of term deposits or even wholesale funds," Mr Chronican told reporters on Thursday.

"We’re trying to create a gap between the Reserve Bank’s move.

"Sometimes when the Reserve Bank moves its cash rate down, long term rates go up, sometimes long term rates go down.

"We want to give the market time to settle and see how our rate structure works.

"We felt it appropriate to be able to look at the full range of funding costs when we made our decision and the best time to do that was with the lag after the Reserve."

Bank of Queensland is the only significant lender to have moved since Tuesday, reducing its home loan interest rates by 20 basis points.

Carl Weston from Austral Lending Solutions added “It is my personal opinion that this latest rate drop will help drive the market to property and help re establish the confidence in that market as a good place to invest money and since the RBA is doing the right thing and encouraging borrowings by dropping base interest rates, that maybe the banks should follow suit to encourage the same endeavour which at the end of the day makes them more money.

Story source: www.ninemsn.com.au

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