Borrow
‘Loyalty tax’ no ‘fees for no service’ situation: Westpac CEO
Chief executive of Westpac Brian Hartzer has dismissed suggestions that the disparity between back book and front book mortgage pricing is comparable to the “fees for no service” scandal.
‘Loyalty tax’ no ‘fees for no service’ situation: Westpac CEO
Chief executive of Westpac Brian Hartzer has dismissed suggestions that the disparity between back book and front book mortgage pricing is comparable to the “fees for no service” scandal.
Appearing before the House of Representatives Standing Committee on Economics on Friday (8 November), Westpac CEO Brian Hartzer denied that the bank was applying a “loyalty tax” by charging higher interest rates to existing borrowers.
Deputy chair of the committee and Labor MP Andrew Leigh went further, drawing a link between the disparity in front and back book mortgage pricing with the charging of “fees for no service” to wealth customers, as brought to light by the banking royal commission.
“Given that you have paid over $1 billion on fees for no service, it surprises me that you don’t see a fees for no service issue arising with these loyalty taxes,” Mr Leigh said.
However, Mr Hartzer denied that the two were comparable, noting the nuances involved in determining mortgage rates.
“I think the issues are quite different,” he said.
“As we talked about on the financial planning side, we had an issue around record keeping that related to a service and a business that we’ve now exited.
“The pricing dynamics in the mortgage market are complex; there are a lot of things that go into managing a bank balance sheet and we have to be mindful of all of our funding costs, including for depositors, and our wholesale borrowing costs.”
Mr Hartzer reiterated that lower rates offered to new borrowers played an important role in fostering competition in the mortgage market.
“We want to continue to be very competitive for new business,” he added.
The Westpac CEO also denied that the bank has made it difficult for existing borrowers to switch to a lower rate and added that the bank provides customers with a more holistic service, beyond interest rates.
“We don’t make it difficult for people to switch, we make it very easy for people to ring up if they want to discuss their arrangements,” Mr Hartzer said.
“I think it’s important to recognise the value that people get from a relationship with Westpac. It’s more than just the price they pay on a single product.
“I think customers are making a choice about the relative value versus the relative price that they’re paying.”
Scrutiny over the pricing behaviour of the big banks recently intensified following their failure to pass on the RBA’s full 25 basis point cuts to the cash rate.
This triggered Treasurer Josh Frydenberg to commission the Australian Competition and Consumer Commission (ACCC) to conduct a home loan pricing inquiry.
The inquiry will review pricing behaviour from 1 January 2019 to examine:
- the differences between advertised rates and the prices actually charged or paid;
- the differences between rates paid by existing customers and those paid by new customers (front and back book pricing behaviour);
- pricing decisions in response to changes to the official cash rate; and
- factors preventing customers from switching to cheaper home loans.
In exploring these matters, the ACCC will consider consumer decision-making and biases, information used by consumers and the extent to which lenders may contribute to consumers paying more than they need to for home loans.
Loans
Home lending surge shatters records with $24bn in loans
The total value of loan commitments for investor housing rose 6 per cent month-on-month to reach $5.6 billion in November last year, as the property market heated up in the lead-up to Christmas. ...Read more
Loans
Mortgages slashed 6,777 times in 2020
Record-low interest rates have seen lenders make almost 7,000 cuts to home loans throughout 2020, but mortgage-holders and investors remain disinterested in getting a better rate, new research has rev...Read more
Loans
Aussies urged to avoid holiday debt
Christmas presents, New Year’s drinks, travel plans… December is an expensive time of year, but while the wallet can be on the slim side in January, Aussies are being urged to be careful when turn...Read more
Loans
Consumer groups slam axing of safe lending laws
One hundred and twenty-five organisations have banded together to oppose the federal government’s proposed relaxation of responsible lending laws, arguing it will hurt consumers and the broader e...Read more
Loans
‘Most Australians are through the worst’ as mortgage repayments resume
In a positive sign for the Australian economy, nearly 7 in 10 Australians who paused payments due to the COVID-19 pandemic have resumed repaying their mortgages, new figures have shown. ...Read more
Loans
Non-majors announce rate cuts
A number of non-major lenders have announced that they will pass on the full RBA rate cut to all existing variable rate home loan borrowers. ...Read more
Loans
Big 4 cut interest rates
Westpac, CBA, NAB and ANZ have all reduced their fixed rate home loans and some business loans following the Reserve Bank’s reduction of the official cash rate. ...Read more
Loans
What the RBA’s rate cut means for you
The RBA has slashed the official rate cut to a new record low of 0.10 per cent, but what does that mean for you? ...Read more
Loans
Home lending surge shatters records with $24bn in loans
The total value of loan commitments for investor housing rose 6 per cent month-on-month to reach $5.6 billion in November last year, as the property market heated up in the lead-up to Christmas. ...Read more
Loans
Mortgages slashed 6,777 times in 2020
Record-low interest rates have seen lenders make almost 7,000 cuts to home loans throughout 2020, but mortgage-holders and investors remain disinterested in getting a better rate, new research has rev...Read more
Loans
Aussies urged to avoid holiday debt
Christmas presents, New Year’s drinks, travel plans… December is an expensive time of year, but while the wallet can be on the slim side in January, Aussies are being urged to be careful when turn...Read more
Loans
Consumer groups slam axing of safe lending laws
One hundred and twenty-five organisations have banded together to oppose the federal government’s proposed relaxation of responsible lending laws, arguing it will hurt consumers and the broader e...Read more
Loans
‘Most Australians are through the worst’ as mortgage repayments resume
In a positive sign for the Australian economy, nearly 7 in 10 Australians who paused payments due to the COVID-19 pandemic have resumed repaying their mortgages, new figures have shown. ...Read more
Loans
Non-majors announce rate cuts
A number of non-major lenders have announced that they will pass on the full RBA rate cut to all existing variable rate home loan borrowers. ...Read more
Loans
Big 4 cut interest rates
Westpac, CBA, NAB and ANZ have all reduced their fixed rate home loans and some business loans following the Reserve Bank’s reduction of the official cash rate. ...Read more
Loans
What the RBA’s rate cut means for you
The RBA has slashed the official rate cut to a new record low of 0.10 per cent, but what does that mean for you? ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
