With the spate of recent rate hikes by the major and non-major banks, the Finance Brokers Association of Australia (
FBAA) has called upon lenders to justify these decisions.
Since the Federal Budget was handed down in May, investor and interest only loans have increased by as much as 66 basis points without much explanation as to why, said FBAA executive director Peter White.
“And it’s not just the big four that have done this. Most banks are doing it, but they haven’t justified their reasons for going this route.
“Are they passing on the bank levy to consumers before it comes into play on 1 July, trying to slow the market, or destroy small business borrowers by restricting interest only borrowings?”
He also noted that the Australian Competition and Consumer Commission (ACCC) had yet to determine whether the reasons for these increases were legitimate.
The banks could be compelled by the ACCC to account for their rate movements, he said, questioning what the ACCC was doing about these movements and what the government was saying to lenders.
“While banks may claim these movements have nothing to do with the bank levy, they are leaving themselves open to criticism as it appears this isn’t the case,” he said.
“Where’s their compliance? Or is the issue that the ACCC is a toothless tiger?”
The market needs to know what’s going on, he added, especially with the size of certain recent rate movements.
In response to White’s statement, the ACCC told
Australian Broker that it was currently building a Financial Sector Competition Unity to undertake regular inquiries into specific competition issues within the financial sector.
“The ACCC’s new Financial Sector Competition Unit’s first task is to commence a one-year price inquiry into residential mortgage products to 30 June 2018,” an ACCC spokeswoman said.
“As part of this inquiry, the ACCC can compel the major banks to explain any changes or proposed changes to fees, charges, or interest rates in relation to residential mortgage products affected.”
The role of the ACCC will be to check the veracity of the bank’s claims and notify the public when these representations are misleading, she added. Furthermore, the ACCC will determine a baseline for residential mortgage products and ask the banks to explain changes to fees, prices and charges over time.
“The ACCC will also provide customers with transparency as compulsory investigative information gathering powers will allow the ACCC to substantiate claims made by banks in relation to residential mortgages,” the spokeswoman said. “Through that, the ACCC will be able to provide consumers with a better understanding of how the big banks make decisions on changes to their mortgage rates.”
From past experience, this added transparency will have an important effect on bank behaviour, she added.
Discussing the bank levy, the spokeswoman noted that the ACCC will be assessing bank behaviour in relation to pass-through of the levy over the coming year. This will also help assess the level of competitiveness within the banking sector.
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