Bring it on, say big banks
Treasurer orders probe on rates
THE big banks have wel- comed 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, the Australian Competition and Consumer Commission, 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 move could put pressure on banks to pass on a greater proportion of the widely expected November rate cut, sacrificing margin to head off further public and governmental opprobrium.
UBS analyst Jon Mott said the majors could offset that by reducing discounts to new customers, but noted that revenue pressures were accelerating.
Investors seemed unconcerned by news of the inquiry, driving up shares in all big four banks by more than 1 per cent at some point in yesterday’s trade. They were still up by between 0.75 and 1.13 per cent shortly before the close.
The Australian Banking Association noted more “public scrutiny”, but ANZ and NAB accentuated the positive.
“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 said.
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.
He and NAB retail boss Mike Baird both suggested the competition watchdog, which will publish its interim report by March 30, could help address that.
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 already working on compliance with open data regulation that will make it easier for customers to switch lenders.
The ACCC will also look at how rates paid by new customers compare with those for existing customers and banks’ obfuscation of actual lending rates. AAP