SYDNEY (Reuters) – Australia’s big four banks said on Wednesday they would not cut rates for the majority of their mortgage customers, even after the central bank pledged to keep rates close to zero for about three years, while lenders try to save their profits.

Instead, the so-called “Big Four” lenders – Commonwealth Bank of Australia CBA.AX, Westpac Banking Corp WBC.AX, National Bank of Australia NAB.AX and Australia and New Zealand Banking Group ANZ.AX – said they would cut interest rates for small and medium-sized businesses and lower fixed rates for mortgage holders to record levels.

By not passing the rate cut on to the majority of their mortgage customers, banks are saving between 3 and 5 basis points on their net interest margins, according to analysts at JPMorgan, which have fallen from more than 3% in the early 2000s to less than 2% now.

Australia’s central bank on Tuesday cut its key rate to 0.1% to support the economy after the country’s worst slowdown in a generation, pledging not to raise it for at least three years.

The four banks, which hold around 80% of the country’s mortgages, already have more money than they can use amid weak credit demand.

The drop in rates is therefore hurting them.

The CBA first announced a 100 basis point cut in its four-year fixed rate mortgage loans for homeowners to 1.99% per annum, its lowest level ever, and reduced rates for businesses. . Westpac and NAB then followed suit.

ANZ was the last of four banks to announce that it would cut its fixed rates on mortgage terms for one to five years from 0.2% to 0.4% per annum.

Shares of CBA and Westpac each ended down 2% on Wednesday, underperforming the broader market .AXJO, which closed 0.1% lower. NAB fell 1.1% and ANZ finished 0.9% lower.

“We are in an extraordinary time with the official cash rate at an all-time low and unconventional monetary policy measures in place,” said Richard Burton, head of Westpac’s consumer division.

“It is essential that we carefully manage changes in interest rates. “

According to JPMorgan, up to 40% of the funding of Australia’s Big Four banks is rate insensitive, which means they do not benefit from rate cuts.

A number of smaller competing non-bank lenders, which finance themselves in the capital markets and therefore benefit directly from rate cuts, passed full rate cuts on to mortgage customers.