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RBA governor Philip Lowe has urged mortgage holders to"shop around". — RBA governor Philip Lowe has urged mortgage holders to "shop around".Credit:Christopher Pearce

Speaking at an RBA board dinner on Tuesday night,Dr Lowe admonished the banks who failed to pass on the full rate cuts,and suggested that decision could cost them customers in the long run.

Dr Lowe had earlier said the banks should pass on the full cuts because of a substantial reduction in banks'funding costs.

"I didn't say they would pass it through,I said they should pass it through. It's disappointing to me that that hasn't been the case,"Dr Lowe said.

"All I can do is encourage people to shop around. If your bank has not passed this through,then I encourage you to go and look for a better deal somewhere else."

All I can do is encourage people to shop around ... I encourage you to go and look for a better deal somewhere else
RBA governor Philip Lowe

Within minutes of the RBA's 0.25 percentage point rate cut on Tuesday afternoon,ANZ Bank announced it would pass through just 0.18 percentage points. Commonwealth Bank and NAB passed on the full cut,while Westpac announced a 0.20 percentage point cut to its variable home loan rates for owner-occupiers,and a 0.35 percentage point reduction for investors with interest-only loans.

Dr Lowe said the onus was on consumers to pressure banks into competing harder with each other,with the competition leading to cheaper mortgages.

"The experience has been,over recent times,that when people do go and look for a better deal from another bank,or even actually ask their own bank,they can normally find a better deal.

"So I encourage everyone who has a mortgage to go to their bank and ask for a better deal. If you haven't done it recently,you can probably find you can get a better deal."

Dr Lowe said a collective response by bank customers would help force lending rates down for everyone.

"In the end,the way we get banks to compete with one another is be responsive consumers. We go and search out better deals,we ask for them,and then we switch.

"The 25 million of us living in Australia can make the banks compete more effectively by going and asking for a better deal and switching. I encourage everyone to go and do that if you're unhappy with the mortgage rate that you're currently paying."

As the governor wrapped up his remarks and his dinner guests prepared to eat their dinner,the evening's host thanked Dr Lowe for his"free advice".

"It's not financial advice,I don't have a licence!"Dr Lowe said to raucous laughter.

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