ME Bank cuts 16 basis points

After passing on 30 basis points of the Reserve Bank's 50 basis point cash rate cut in May, ME Bank has passed on only 16 basis points of the latest cash rate reduction to its home loan customers.

Small financial institutions, largely dependent on retail deposits for their funding, are being squeezed in the current market. High funding costs are making it hard for a number of them to match the recent reductions in the cash rate.

Last month a number of lenders - all of them credit unions and building societies - passed on only half the RBA rate cut. These included Victoria Teachers Mutual Bank, Teachers Mutual Bank, Service One, Police and Nurses Credit Society, Macquarie Credit Union, IMB, Horizon Credit Union and CUA.

Standard variable rates fell by an average of 32 basis points in May, while high-yield savings account rates fell by an average of 43 basis points.

More than 40 institutions cut their savings rates by 50 basis points in May. ME Bank cut the deposit rate on its online savings account by 50 basis points.

So far this month, the average reduction in standard variable home loan rates has been 21 basis points. Two lenders, ANZ and Unicredit WA, have passed on the full 25 basis point cut in the cash rate.

Four lenders announced standard variable rate changes yesterday. UBank cut its rate by 21 basis points to 5.82 per cent, Bank of Melbourne cut its rate by 19 basis points to 6.8 per cent, State Custodians cut its rate by 20 basis points to 5.82 per cent and AMP cut its rate by 20 basis points to 6.87 per cent.