Yet another inquiry has been announced into mortgage pricing as the ACCC is tasked to examine the banks failure to pass on in full official interest rate cuts engineered by the central bank. The ACCC’s preliminary report is due by 30 March next year, six months before the final report.
Beyond the crocodile tears, there are important questions here, because as we have highlighted, loyalty is not rewarded as the banks cut rates to attract new customers. In addition, deposit margin compression has reach a floor, and funding costs are under pressure. But nothing has fundamentally changed from recent ACCC and Productivity Commission reports. Yet, having another investigation takes pressure off The Treasurer, conveniently.
Via The Guardian. The treasurer, Josh Frydenberg, has asked the competition watchdog to examine why many mortgage holders are being charged rates well above the cash rate record low of 0.75%.
The higher rates have prompted allegations of price gouging by the banks – Commonwealth Bank, Westpac, ANZ and National Australia Bank – which have previously cited funding costs as a reason why not all reductions could be passed on.
“We need information about the cost of the funds of the banks and … why they’re not passing on these rate cuts in full,” Frydenberg told ABC television on Monday.
The inquiry, which will also include smaller institutions, comes after an earlier royal commission into misconduct in the banking sector uncovered predatory practices and dented market confidence.
But Frydenberg shrugged off suggestions that the new inquiry by the Australian Competition and Consumer Commission would further affect confidence in Australia’s banks.
“I actually did call the CEOs of the big four banks yesterday and told them that this could actually help clear the air,” he said. “But at the same time, you know, they’re defending their patch and will continue to do.”
The treasurer said the banks need to explain how they balance the competing needs of shareholders and customers.
The official cash rate is at a record low of 0.75% after the Reserve Bank of Australia cut interest rates three times this year. But the big four banks on average passed on only 75% of the total reductions to their customers.
“There are a number of smaller lenders that have actually wasted no time in passing on these rate cuts on in full,” Frydenberg said.
“If the big four banks had passed on these 75 basis point rate cuts, then somebody with a $400,000 mortgage would be more than $500 a year better off in lower interest payments.”
The ACCC’s preliminary report is due by 30 March next year, six months before the final report.
Why cannot mortgage holders abouve 80% LVR be allowed to have portability in their LMI is switching lenders ? Otherwise not cost effective to switch for better deals as touted by Treasurer and finance experts !
2. Why doesn’t banks source more overseas money to fund lending so maintain their profit margins on mortgages?