The Finance Brokers Association of Australia (FBAA) believes banks need to look beyond mortgages when passing on interest rate relief to struggling households and also focus on personal finance products such as credit cards.

FBAA National President, Peter White, said while the Association accepts that due to the credit crisis the major banks may not be in a position to pass on the full RBA 1.0 percent lowering of rates on mortgages there are many other personal finance products where excessive margins can be reduced to reflect the cut in official rates.

“We have to accept in good faith that, due to the turmoil in international financial markets and the subsequent increase in the cost of funds, the banks need to exercise a degree of caution in relation to mortgages in order to protect their long-term viability,” Mr White said.

“Mortgages aside, there are many other areas where banks can provide relief to households and the most obvious place to start is credit cards.

“Credit cards are routinely overlooked when an interest rate cut is provided by the RBA. When official rates increase the banks move with incredible agility to factor in the adjustments to credit cards but it never works in reverse when rates are cut.

“Given the excessive interest rates that apply to credit cards, a very compelling case would need to be put forward to convince me that the banks can’t hand down the full RBA interest rate cut.

“All forms of debt and personal credit are inter-related and combine to form a household’s overall financial position. With personal debt spiralling out of control in Australia, it’s time the banks trimmed some of their margins on credit cards and adjusted interest rates to be in line, at the very least, with the RBA cut.

“It’s important for the banks to protect their financial strength in the current economic environment. However, remaining viable doesn’t mean they need to post year-on-year record profits at the expense of Australian households”. Mr White said.