Invest
Who’s to blame for banks not passing on savings?
Following news of an inquiry into mortgage pricing, critics have in turn hit out at the regulators as the ones at fault for the banks’ failure to pass on the entirety of the rate cuts.

Who’s to blame for banks not passing on savings?
Following news of an inquiry into mortgage pricing, critics have in turn hit out at the regulators as the ones at fault for the banks’ failure to pass on the entirety of the rate cuts.

In conversation with nestegg, Propertyology managing director Simon Pressley has explained that over-regulation of the financial industry has led to misdirected anger at Australia’s banks.
Misdirected anger
Mr Pressley said the blame for the banks not passing on a rate reduction is misdirected, saying that it should instead be directed to the financial sector regulator having made it too difficult to switch lenders.
“The ridiculous over-engineering of the loan application process has destroyed productivity and enormously diluted the competitive advantages which former generations of regulators fought so hard for Australia to have,” the managing director said.
Comparing refinancing to a “gaol cell”, Mr Pressley expressed the belief that refinancing of loans has become so complex that consumers stick with overpriced mortgages rather than renegotiating terms.
“Once a borrower acquires their loan, the system locks them in. Banks know they can get away with not passing on full rate cuts because APRA has made the refinance process more painful than pulling toenails with a pair of pliers.”
Where the banking industry places the blame
Australian Banking Association chief executive Anna Bligh also weighed in, noting no problem with ADI competition: “Whether you’re looking for a new home loan, a credit card or a transaction account, competition for a customer’s business is fiercer than it has ever been.”
The sector sentiment could be seen to echo this stance, with Westpac CEO Brian Hartzer having gone on the front foot to outline why the bank is not putting profit ahead of customers in its refusal to pass on the full rate cut.
He argued instead that it is protecting its credit rating.
According to the CEO, if the bank’s credit rating falls, the bank will have to pay more for credit, ultimately leading to higher costs for consumers.
“Westpac must also retain its double A rating,” he offered.
“This rating allows the bank to import funding at a more reasonable cost from international investors.”
“To lose it would increase the cost of our wholesale funding, which would inevitably lead to higher interest rates for our borrowers,” Mr Hartzer continued.
The government’s stance
On the other hand, the government has gone after the banks, expressing the opinion that the banks have put profits before customers in their refusal to pass on the full rate reduction.
“The banks have a lot of explaining to do,” were the words of Treasurer Josh Frydenberg, who also said “customers should vote with their feet”.
“Now, some of the smaller lenders have actually passed on this rate cut in [full],” he said.
“People should shop around, get the best deal, but also make their displeasure known to their banks because the rate cuts should be passed on in full, and that would be a good thing for consumers.”
About the author

About the author


Property
Double-digit price growth to stick around as ‘property boom’ arrives
According to leading indicators, Australia’s property boom officially began in November, following several slow months on the back of the COVID crisis, with double-digit price growth already logged ...Read more

Property
How to turn your ‘costly’ lifestyle investment into a money-making asset
Emotionally driven holiday home buyers are being advised to seek maximum rental income and depreciation benefits to make their investments viable. ...Read more

Property
Dutch e-commerce giant VidaXL ramping up Australian operations
Netherlands-based online retailer VidaXL is ramping up its operations in Australia, by launching the build of a brand new 81,000 sq m national distribution centre in Melbourne. ...Read more

Property
Invest in property or watch savings dwindle, expert warns
Money is cheaper than it’s ever been on the back of a favourable interest rate environment, compelling Aussies to shift away from other types of investment vehicles and into property investment. ...Read more

Property
Is 2021 a great year to buy property? Aussies think so
2021 is tipped to be one of the busiest years for property ever as money remains cheap and readily accessible, with a majority of Aussies agreeing that now is a good time to buy. ...Read more

Property
Young Aussies set their sights on home ownership in 2021
The COVID-19 pandemic has accelerated younger Australians’ desire to own their own home, despite affordability remaining a significant concern, new research has revealed. ...Read more

Property
HomeBuilder stimulus causing surge in new houses: ABS
Housing schemes such as HomeBuilder and historically low-interest rates are causing a surge in new properties being built in Australia, official stats have shown. ...Read more

Property
Cancelled gap years could trigger first home buyer frenzy
COVID-19’s cancellation of travel plans could fuel demand from first home buyers in Western Australia, according to a chief executive. ...Read more

Property
Double-digit price growth to stick around as ‘property boom’ arrives
According to leading indicators, Australia’s property boom officially began in November, following several slow months on the back of the COVID crisis, with double-digit price growth already logged ...Read more

Property
How to turn your ‘costly’ lifestyle investment into a money-making asset
Emotionally driven holiday home buyers are being advised to seek maximum rental income and depreciation benefits to make their investments viable. ...Read more

Property
Dutch e-commerce giant VidaXL ramping up Australian operations
Netherlands-based online retailer VidaXL is ramping up its operations in Australia, by launching the build of a brand new 81,000 sq m national distribution centre in Melbourne. ...Read more

Property
Invest in property or watch savings dwindle, expert warns
Money is cheaper than it’s ever been on the back of a favourable interest rate environment, compelling Aussies to shift away from other types of investment vehicles and into property investment. ...Read more

Property
Is 2021 a great year to buy property? Aussies think so
2021 is tipped to be one of the busiest years for property ever as money remains cheap and readily accessible, with a majority of Aussies agreeing that now is a good time to buy. ...Read more

Property
Young Aussies set their sights on home ownership in 2021
The COVID-19 pandemic has accelerated younger Australians’ desire to own their own home, despite affordability remaining a significant concern, new research has revealed. ...Read more

Property
HomeBuilder stimulus causing surge in new houses: ABS
Housing schemes such as HomeBuilder and historically low-interest rates are causing a surge in new properties being built in Australia, official stats have shown. ...Read more

Property
Cancelled gap years could trigger first home buyer frenzy
COVID-19’s cancellation of travel plans could fuel demand from first home buyers in Western Australia, according to a chief executive. ...Read more