Powered by MOMENTUM MEDIA
Broker Daily logo

New reforms see ACCC target major bank mortgages

The House of Representatives standing committee on economics has recommended that the ACCC assess the pricing decisions of interest-only mortgages earlier this year.

The committee this week published its third report on reforming the Australian banking sector. The report builds on the suite of important reforms previously recommended by the committee, which have been broadly adopted by the government.

One of the committee’s key recommendations is that the Australian Competition and Consumer Commission (ACCC), as a part of its inquiry into residential mortgage products, should assess the repricing of interest-only mortgages that occurred in June 2017.

The chief executives of Australia’s four largest banks – ANZ, CBA, NAB and Westpac – appeared in Canberra in October to answer questions about their decision to hike interest-only rates in response to APRA’s regulatory measures.

==
==

Outgoing CBA chief executive Ian Narev was the last to appear. On Friday, 20 October he faced a volley of questions from committee members led by chair David Coleman MP.

CBA was one of the more prescriptive of the majors in its 27 June media release, which alerted the market of a 30-basis point rate hike for new and existing interest-only mortgage holders “to meet regulatory requirements”.

Mr Coleman asked Mr Narev if the regulatory cost to the bank was the equivalent required to increase rates by 30 points.

“The reason we made the pricing move was to make sure we met our regulatory requirements,” the CBA chief executive said. “And the quantum of the pricing move was made in response to having seen what our competitors had done to meet those requirements.

“We were not the first bank to move and part of our decision was based on a competitive market.”

Westpac’s media release on 20 June 2017, stated: “APRA’s limit on new interest-only lending is 30 per cent of new residential mortgage lending, so we have to continue to make changes to our interest-only rates and lending policies to meet this benchmark.

“While the media releases indicate that the rate increases were primarily, or exclusively, due to APRA’s regulatory requirements, the banks stated under scrutiny that other factors contributed to the decision,” the committee’s third report said.

“In particular, banks acknowledged that the increased interest rates would improve their profitability.”

[Related: Narev comes clean on CBA's '$500m' rate hike]

More on Economy
11 November 2024
An increase in mortgage demand has suggested that consumer confidence is beginning to improve amid rate cut expectations
11 November 2024
The Treasury’s analysis of Australia’s economic performance highlighted plenty of concerning trends. However, business ...
11 November 2024
Mortgage interest charges have continued to rise, however, have been offset by lower fuel and electricity prices.