Aussie Home Loans (AHL) added on Wednesday to the growing call for the Reserve Bank of Australia (RBA) to cut interest rate. AHL Chairman John Symond called for at least 50 basis points reduction.

"A 25 basis point cut will do zero for the economy, as the banks won't pass it all in full and mums and dads will be left with only crumbs. It will have no impact on consumer behaviour," The Herald Sun quoted Mr Symond.

"The RBA needs to be proactive and cut rates by 50 basis points so that consumers get some benefit and confidence is increased," he added.

Due to the uncertainty facing the Australian economy, AHL experienced a large volume of home loan inquiries in the March quarter. AHL is one third owned by Commonwealth Bank but is run independently.

On Tuesday, St George and the Bank of Melbourne - subsidiaries of Westpac - cut the one-, two- and three-year fixed home loan rates to 5.99 per cent, while ANZ Bank hiked its variable home and small business loan rates by 0.06 per cent despite the decision by the RBA to keep the current overnight cash rate at 4.25 per cent.

According to the minutes of the central bank released on Tuesday, there is a scope for rate reduction when the RBA's monetary board meets in May. The April minutes said the board believed that while current funding cost is higher compared to the middle of 2011, five-year debt funding is now 50 basis points cheaper compared to three months ago.

"The Australian banks have taken advantage of the improvement in funding conditions to issue a large volume of secured and unsecured debt.... Members were briefed on the significant fall in the relative cost of issuance since the start of the year - around 50 basis points for a five-year issue - which would help alleviate the pressure of higher funding costs in coming months," the minutes said.

At the same time, the board acknowledged that the banks still face high costs due to higher deposit rates to attract term-deposit funding as lenders compete aggressively for term deposits.

However, while financial markets expect the central bank to reduce the official cash rate by 25 basis points when it meets on May 1, analysts believe the banks will not pass on any rate cuts to borrowers.

National Australia Bank Chief Executive Cameron Clyne said the focus on funding costs was misplaced. He pointed out that while some costs were going down, banks are replacing older debt with new but more expensive sources of funding.

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