Westpac and ANZ have not passed on the entire rate cut to borrowers after the Reserve Bank decided to lower the cash rate to 1.25% on Tuesday.

Westpac only passed on 0.2 of a point for its principal-and-interest home loans and ANZ 0.18 of a percentage point.

The central bank’s cut aims to stimulate borrowing and investing to increase economic growth.

Treasurer Josh Frydenberg believes that there is no reason why the major banks could not have passed on a full rate cut, according to a report by The West Australian.

“We know that people can move between banks and seek a better deal as well, and I’d encourage them to always look for the best possible deal for themselves and for their families and their businesses,” he told Nine’s Today program.

Frydenberg also said that ANZ let down its customers. "I am very disappointed with the decision the ANZ has taken today. We heard from the royal commission that the banks were putting profits before people,” he told the Australian Financial Review.

In the case of Westpac, the treasurer said the bank owes its customers an explanation for keeping some of the RBA’s rate cut to themselves.

"While I acknowledge Westpac’s decision to spread the benefit of the rate cut among its different customers, ultimately it is up to Westpac itself to explain to its owner-occupier customers why they didn’t get the full benefit," Frydenberg told the Australian Financial Review.

ANZ retail boss Mark Hand admitted that while many borrowers would have hoped to benefit from the full cut, the bank had other considerations.

David Lindberg, Westpac’s chief executive of consumer, meanwhile, said that the historically low interest-rate environment creates the opportunity for homeowners to get ahead on their repayments.