Borrow
Reason for rate cut lag revealed
The consumer watchdog has revealed the reason central to the decisions of Australia’s big four banks to not always pass on RBA rate cut savings to home loan customers in 2019.
Reason for rate cut lag revealed
The consumer watchdog has revealed the reason central to the decisions of Australia’s big four banks to not always pass on RBA rate cut savings to home loan customers in 2019.
The Australian Competition and Consumer Commission’s (ACCC) Home Loan Price Inquiry interim report has just been released, which revealed the banks’ major motivators in not passing on savings to consumers.
ACCC chair Rod Sims commented that “the banks were attempting to shore up their profitability during a period of low interest rates”.
“It was their strong preference, after the RBA’s cuts, not to further reduce the rates customers were earning on some deposit products as they approached zero per cent,” he indicated.
He added that “the banks’ reluctance to cut these deposit rates led them to anticipate lower profits, which they aimed to recover by not always fully passing through cash rate cuts to their mortgage customers”.
Analysis from the consumer watchdog also found that the big four banks had benefited from sustained decreases to their funding costs over the course of 2019, with the report revealing that while headline rates for owner-occupier home loans with principal and interest repayments did fall overall during 2018 and 2019, the banks’ funding costs fell even more over the same period.
The interim report also revealed that while average interest rates charged by banks on home loans did fall across 2019, customers are still paying more than they should be due to a lack of price transparency and higher interest rates impacting existing customers.
One finding from the report even flagged that home loan pricing practices continue to make it difficult for consumers to compare different mortgage products.
Mr Sims said the inquiry findings “shed an important light on bank decision making and raise questions about whether the banks could, at the time, have passed on a higher proportion of those RBA cash rate cuts to their mortgage customers”.
At the same time, he said the ACCC does recognise that “much has changed in the economic and funding environment since last year”.
“The banks are playing an important role in supporting the economy.”
The interim report examined home loan prices charged by the big four banks between 1 January 2019 and 31 October 2019.
Treasurer Josh Frydenberg issued the direction for an inquiry into the market for the supply of home loans in October last year after he expressed frustration with the big four banks for not fully passing on rate cut savings from the Reserve Bank of Australia in July 2019 or October 2019.
More to come.
About the author
About the author
Banking
Wealth giants hit with $3m penalty for fees for no service
The Federal Court has issued Westpac subsidiaries, BT and Asgard, $3 million in penalties for charging fees for no service and making misleading statements to consumers. ...Read more
Banking
Is Australia’s open banking system falling short?
The era of open banking in Australia has arrived, but are consumers being let down by accuracy problems with the data involved? ...Read more
Banking
Companies usher their employees to vaccine sites
In a bid to reopen the Australian economy, various business groups, including the big four banks, will pay their casual staff to get a COVID-19 jab. ...Read more
Banking
Big 4 extends freeze on foreclosures until 2022
A major bank has announced that it is extending the freeze on foreclosures it first announced in November 2020, until at least February 2022. ...Read more
Banking
COBA warns of ‘a python squeeze to competition in retail banking’
Retail banking industry advocates fear that new regulations will further entrench the dominance of Australia’s big four. ...Read more
Banking
ASIC drops criminal charges against AMP
The corporate watchdog has announced it has finalised an investigation into the alleged fees-for-no-service conducted by AMP’s financial planning, as part of the royal commission into the banking s...Read more
Banking
Banks asked to prepare for negative interest rates
Banks have been told to draft plans to deal with the possibility of zero or negative interest rates by April 2022, with the aim to evade potential “operation challenges”. ...Read more
Banking
RBA makes cash rate call amid wild speculation
The Reserve Bank of Australia has made its first call on the official cash rate for this financial year. ...Read more
The Olympic effect on property and equity investors; COVID-19 Disaster Payments and super
Listen now
Do lockdowns boost property prices? Are short-sellers levelling the playing field? Did you lodge your tax returns early?
Listen now
Will lockdowns halt the housing boom? Is the metaverse taking over? And the cons of lodging your tax returns early
Listen now
Are you being priced out of the market? Have you got the Tuesday blues? And are you ready for the upcoming super changes?
Listen now
Banking
Wealth giants hit with $3m penalty for fees for no service
The Federal Court has issued Westpac subsidiaries, BT and Asgard, $3 million in penalties for charging fees for no service and making misleading statements to consumers. ...Read more
Banking
Is Australia’s open banking system falling short?
The era of open banking in Australia has arrived, but are consumers being let down by accuracy problems with the data involved? ...Read more
Banking
Companies usher their employees to vaccine sites
In a bid to reopen the Australian economy, various business groups, including the big four banks, will pay their casual staff to get a COVID-19 jab. ...Read more
Banking
Big 4 extends freeze on foreclosures until 2022
A major bank has announced that it is extending the freeze on foreclosures it first announced in November 2020, until at least February 2022. ...Read more
Banking
COBA warns of ‘a python squeeze to competition in retail banking’
Retail banking industry advocates fear that new regulations will further entrench the dominance of Australia’s big four. ...Read more
Banking
ASIC drops criminal charges against AMP
The corporate watchdog has announced it has finalised an investigation into the alleged fees-for-no-service conducted by AMP’s financial planning, as part of the royal commission into the banking s...Read more
Banking
Banks asked to prepare for negative interest rates
Banks have been told to draft plans to deal with the possibility of zero or negative interest rates by April 2022, with the aim to evade potential “operation challenges”. ...Read more
Banking
RBA makes cash rate call amid wild speculation
The Reserve Bank of Australia has made its first call on the official cash rate for this financial year. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
