Despite the Reserve Bank’s 0.25 per cent official rate cut last week, mortgage customers are still paying higher rates than expected as money-hungry banks fail to pass on the rate cut in full. In fact, Prime Minister Malcolm Turnbull ordered Australia’s big four banks to give a thorough explanation on how they set their interest rates.

Among the four major banks, the National Australia Bank has been the greediest, keeping 0.86 per cent of the falls from its customers since the cash rate began its downward spiral in November 2011. ANZ, meanwhile, withheld 0.7 per cent of its standard variable rate from its customers, while Westpac and Commonwealth Bank held back 0.68 and 0.66 per cent of the rate cut, respectively. The full rate cut would have allowed customers to save as much as $45 per month.

But according to Mitch Watson, spokesman of financial services company Canstar, many other small lenders also followed the big four’s example.

“A number of smaller institutions have followed the big four’s lead, with only a very small number passing on the full rate cut,” he said.

However, there are still rock-bottom deals available in the three per cent range, which experts advised borrowers to secure. Peter Arnold, a spokesman for financial comparison site RateCity, said smaller lenders are engaged in a ‘rate war’ as they each strive to get the lowest rate on the market. At the moment, lender Reduce Home Loans is offering a variable rate of 3.35 per cent-the lowest-ever deal found on RateCity.