NAB blasts tracker mortgage ‘danger’
NATIONAL Australia Bank chief Andrew Thorburn says regulating home loan prices “would be a dangerous step” as the banking industry tries to quell growing support for so-called tracker mortgages.
His comments came after Prime Minister Malcolm Turnbull hinted Cabinet may consider legislating for tracker mortgages if the Government’s bank inquiry committee recommends them.
NAB was “not keen” on the introduction of tracker mortgages – loans pegged to movements in the Reserve Bank’s cash rate or another independent benchmark rate, Mr Thorburn said.
Tracker mortgages were among themes discussed at the parliamentary house economics committee’s banking inquiry earlier this month.
“We don’t fund our mortgage book off the cash rate – we never have,” Mr Thorburn said yesterday on 3AW Radio in Melbourne.
“We have a range of funds that come from different sources that we pull together to lend out.
“We’re not keen on (tracker mortgages) because it does increase the risk for the bank because it links it to a rate that we do not fund off.”
Earlier, the head of the corporate watchdog said lack of competition in the home loan market was preventing consumers from being offered tracker mortgages.
Australian Securities and Investments Commission chairman Greg Medcraft told the House of Representatives’ standing committee on economics the loans would offer consumers transparent pricing.
“We’re in a market that is, frankly, an oligopoly ... I think the reason we don’t have them today is because there is a lack of competition,” Mr Medcraft said.
Mr Turnbull, interviewed on 3AW before Mr Thorburn, said the introduction of tracker mortgages was “a question that needs further discussion”.
“What I recalled from the hearing – a loan of that kind, the rate would unlikely be competitive or attractive to households,” he said.
“I run a very considered cabinet government and we take these issues very seriously and we’ll consider them very seriously.
“Any recommendations that come from the House economics committee will be very carefully examined. This appears to be one of the matters that is being considered.”
The support for tracker mortgages, which are common in countries such as the US, has risen sharply following the parliamentary bank inquiry.
Mr Medcraft suggested banks could simply adopt the same approach to products for consumers as they do for corporate products.
“This is not a new concept. Corporate Australia has tracker loans called the bank bill rate,” Mr Medcraft said.
Mr Thorburn said tracker mortgages would increase the risks faced by the bank.
“Banking is a profession that’s got a lot of risk attached and I think you need to understand the complexities and therefore regulating pricing I think would be a dangerous step,” he said.