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
Big banks push for BNPL regulations
The success of consumer take-up and the ease of credit provided by the buy now, pay later sector have seen the major banks renew calls for tighter restrictions on their products, an inquiry heard. ...Read more
Banking
Citi to exit consumer banking in Australia
US investment bank Citigroup has announced that it is pursuing an exit from the Australian market after 36 years. ...Read more
Banking
Westpac faces civil proceedings
The corporate regulator has commenced civil penalty proceedings against Westpac alleging the big four bank used misleading and unfair sales of consumer credit insurance. ...Read more
Banking
CBA to pay $7m penalty for overcharged interest
The Commonwealth Bank of Australia has been ordered to pay a $7 million penalty for charging an interest rate on business overdraft accounts that was substantially higher than what customers were advi...Read more
Banking
CBA taken to court over banking fees
ASIC has commenced civil penalty proceedings against the Commonwealth Bank of Australia, alleging that it charged clients millions in monthly fees when it was not entitled to do so. ...Read more
Banking
Big 4 bank offers $10m in grants to flood-affected customers
A big four bank has launched a $10 million Flood Support Fund to provide grants to customers and businesses in flood-affected areas. ...Read more
Banking
Guide to NSW flood financial aid: From the banks to insurers
The banks are offering customers affected by the NSW floods loan repayment deferrals, among other forms of financial aid, while the Insurance Council of Australia has declared a catastrophe for much o...Read more
Banking
APRA drops big 4 money laundering case
APRA has followed ASIC in closing its investigation into Westpac over the AUSTRAC scandal, which led to the largest corporate fine in Australian history. ...Read more
Is the market overheating; should ETFs take your fancy, and what’s happening to the low and middle income tax offset?
Listen now
Home values up 30% (or are they); NFTs taking the world by storm, and why Keating thinks Aussies will be ‘poor’ in retirement
Listen now
Raging floods, the tech stock bubble and the ongoing SG debate
Listen now
Meet the Manager with Trilogy’s Philip Ryan: RBA rates and property price growth
Listen now
Banking
Big banks push for BNPL regulations
The success of consumer take-up and the ease of credit provided by the buy now, pay later sector have seen the major banks renew calls for tighter restrictions on their products, an inquiry heard. ...Read more
Banking
Citi to exit consumer banking in Australia
US investment bank Citigroup has announced that it is pursuing an exit from the Australian market after 36 years. ...Read more
Banking
Westpac faces civil proceedings
The corporate regulator has commenced civil penalty proceedings against Westpac alleging the big four bank used misleading and unfair sales of consumer credit insurance. ...Read more
Banking
CBA to pay $7m penalty for overcharged interest
The Commonwealth Bank of Australia has been ordered to pay a $7 million penalty for charging an interest rate on business overdraft accounts that was substantially higher than what customers were advi...Read more
Banking
CBA taken to court over banking fees
ASIC has commenced civil penalty proceedings against the Commonwealth Bank of Australia, alleging that it charged clients millions in monthly fees when it was not entitled to do so. ...Read more
Banking
Big 4 bank offers $10m in grants to flood-affected customers
A big four bank has launched a $10 million Flood Support Fund to provide grants to customers and businesses in flood-affected areas. ...Read more
Banking
Guide to NSW flood financial aid: From the banks to insurers
The banks are offering customers affected by the NSW floods loan repayment deferrals, among other forms of financial aid, while the Insurance Council of Australia has declared a catastrophe for much o...Read more
Banking
APRA drops big 4 money laundering case
APRA has followed ASIC in closing its investigation into Westpac over the AUSTRAC scandal, which led to the largest corporate fine in Australian history. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
