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
368k Australians potentially eligible for Westpac class action: Are you one of them?
The Federal Court is set to notify 368,000 Australians that they might be eligible to join a consumer credit class action against the big four bank. ...Read more
Banking
Government introduces royal commission laws
The government is striving to implement a number of the royal commission recommendations in a package that was recently introduced to Parliament. ...Read more
Banking
ANZ cops $10m penalty for wrongful fees
The Federal Court of Australia has found that banking giant ANZ engaged in unconscionable conduct and breached its obligations as a financial services licensee. ...Read more
Banking
How $800m could make banking better
The federal government’s digital business plan to drive Australia’s economic recovery “will make banking faster and easier”, according to an industry group. ...Read more
Banking
How sneaky fees could be costing you hundreds
As many as a quarter of Australians are being stung with unknown, unfair or incorrect banking fees, with the costs adding up during the COVID-19 pandemic, an expert has revealed. ...Read more
Banking
Westpac hit with biggest fine in corporate history
Australian banking and financial services giant Westpac has reached an agreement with AUSTRAC to pay $1.3 billion for breaching anti-money laundering and counter-terrorism financing laws. ...Read more
Banking
6 ways to know you need a new bank
Unhappy with your current bank? Here’s how to know if you need to make a change. ...Read more
Banking
The banks beating the big 4 when it comes to customer satisfaction
Midsize banks are the biggest winners in a new survey of bank customer satisfaction. ...Read more
Banking
368k Australians potentially eligible for Westpac class action: Are you one of them?
The Federal Court is set to notify 368,000 Australians that they might be eligible to join a consumer credit class action against the big four bank. ...Read more
Banking
Government introduces royal commission laws
The government is striving to implement a number of the royal commission recommendations in a package that was recently introduced to Parliament. ...Read more
Banking
ANZ cops $10m penalty for wrongful fees
The Federal Court of Australia has found that banking giant ANZ engaged in unconscionable conduct and breached its obligations as a financial services licensee. ...Read more
Banking
How $800m could make banking better
The federal government’s digital business plan to drive Australia’s economic recovery “will make banking faster and easier”, according to an industry group. ...Read more
Banking
How sneaky fees could be costing you hundreds
As many as a quarter of Australians are being stung with unknown, unfair or incorrect banking fees, with the costs adding up during the COVID-19 pandemic, an expert has revealed. ...Read more
Banking
Westpac hit with biggest fine in corporate history
Australian banking and financial services giant Westpac has reached an agreement with AUSTRAC to pay $1.3 billion for breaching anti-money laundering and counter-terrorism financing laws. ...Read more
Banking
6 ways to know you need a new bank
Unhappy with your current bank? Here’s how to know if you need to make a change. ...Read more
Banking
The banks beating the big 4 when it comes to customer satisfaction
Midsize banks are the biggest winners in a new survey of bank customer satisfaction. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
