Experts forecast over the weekend that the Reserve Bank of Australia (RBA) will retain the record-low 3 per cent overnight cash rate when it meets on Tuesday for its monetary policy decision.

The experts said that recent decline in global funding costs have increased prospects for major Australian banks to lower rates out of cycle, and if the lower funding costs were sustained, the major lenders could lower rates independent of RBA decision by mid-2013.

Nomura banking analyst Victor German said if the reduced funding pressures are sustained, the banks may cut their rates in the next three to six months. In 2012, the big four pocketed part of the rate cuts made by the Australian central bank, earning them an additional $2.4 billion.

As a result of the several key lending rate cuts made by the RBA in 2012, it removed about $2,000 from the yearly cost of servicing a typical mortgage in the last 12 months.

The October and December rate cuts reduced by $75 the monthly amortisation of a $300,000 home mortgage, but it could have been $94 had the big four fully passed on the rate cut to borrowers.

Over the weekend, JPMorgan and Goldman Sachs changed their previous forecast that the RBA would make another 25 basis points cut in the benchmark rate, but the two moved the probable date to May.

The big four - ANZ, Commonwealth Bank of Australia, National Australia Bank and Westpac - earned more than $25 billion profits in 2012 and are among the 10 most profitable banks in the world. The Australian Institute attributed the profitability of the big four to their ability to exploit bank customers, particularly home mortgage holders.

The institute pointed out that for every dollar spent in Australia, 2.3 cents became bank profits because of the lenders pocketing a portion of rate cuts made by the RBA. On the average, the institute estimates that mortgage holders have been shortchanged by 39 basis points on the average since the central bank rate cutting cycle started in November 2011.

However, Steven Munchenberg, chief executive of the Australian Bankers Association, said that while borrowing cost from the global market has decreased, large Australian banks compete for deposits, which represents about 60 per cent of banks' borrowings. He said savers or two-thirds of Australian households are actually the big winners for now.

Here are more explanations about the RBA rate cuts in this video.

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