Banks facing rates probe

Big four welcome inquiry into mortgage pricing

THE big banks have welcomed an inquiry into mortgage pricing, with ANZ chief executive Shayne Elliott admitting lenders have not properly explained why their rates do not keep pace with the tumbling cash rate.

Treasurer Josh Frydenberg yesterday announced the competition watchdog will ask why the four majors have not passed on Reserve Bank rate cuts in full to owner-occupiers amid a lack of transparency that means customers struggle to compare lenders.

The Australian Banking Association said customers unhappy with their mortgage rate could soon switch lenders more easily under open banking regulations, and was joined by ANZ and NAB in suggesting the inquiry represented an opportunity for banks to explain themselves.

“The inquiry is a good opportunity to provide facts in what is a complex space and we hope it will provide the public with renewed confidence in the way their home loans are priced,” Mr Elliott (pictured) said.

“We know we have not done a good job in explaining our position.”

Mr Elliott acknowledged cynicism among the public about how banks – whose funding costs rely only in part upon the RBA cash rate – set borrowing costs and said the Australian Competition and Consumer Commission, which will publish its interim report by March 30, could help address that.

NAB retail boss Mike Baird expressed a similar view.

“This is an important opportunity to discuss the challenges of an increasingly low interest rate environment and engage in a broader discussion about how we support all our customers – both depositors and borrowers,” the former Liberal NSW premier said.

The RBA cut the cash rate by a cumulative 0.75 percentage points between June and October, but Commonwealth Bank, Westpac, NAB and ANZ each cut their standard variable rate for owner-occupiers by an average of 57 basis points. The ACCC will consider that gap and, among other issues, the obstacles that stop customers taking their business elsewhere.

Australian Banking Association chief executive Anna Bligh said banks were busy getting compliant with regulation that will make it easier for customers to switch lenders.

“Banks are no stranger to public scrutiny and look forward to the opportunity to cast more light on mortgage pricing and the many important factors that influence the setting of interest rates,” she said.