AUSTRALIA’S MAJOR BANKS ARE IN THE SIGHTS OF THE GOVERNMENT AFTER FAILING TO PASS ON RBA RATE CUTS
Following the decision of Australia’s banks not to pass on the latest RBA interest rate cut in full to home mortgage holders, the nation’s consumer watchdog has been ordered to conduct an inquiry into lending practices
(Staff Writers) 14 October 2019
Australia’s major banks will come under further government scrutiny, this time over home mortgage lending, in a statement Federal Treasurer Josh Frydenberg said, “The Coalition Government has today directed the Australian Competition and Consumer Commission (ACCC) to undertake an inquiry into the pricing of residential mortgage products.
“The inquiry will ensure the pricing practices of Australia’s financial institutions are better understood and made more transparent.”
Both the Federal Government and the ACCC implicitly stated they did not have the power to compel banks to pass on full RBA interests cuts; despite that being proffered by politicians as the reason the inquiry is being held in the first place.
The ACCC made it clear it was “directed” by the Federal Government to conduct this investigation, it will consider matters such as consumer decision-making and biases, information used by consumers and the extent to which banks may contribute to consumers paying more than they need to for home loans.
Since 2008, when Australia’s interest rates began falling from a 22-year high of 7.25%, banks have rarely uniformly passed on cash rate cuts; on three occasions Westpac and ANZ have actually cut rates further than the RBA.
Essentially this inquiry is re-examining long-held banking practices. Rather than forces banks to change their ways, the best hopes for this inquiry are to arm consumers with enough information to make it easy for them to leave their current lenders, in this way banks might be compelled to change their practices.
Said, ACCC Chair Rod Sims, “We will aim to provide answers to the questions that banking customers have long asked. For example, we know from our first financial services inquiry that there is an unusually large difference between the headline rate and the actual rates many customers are paying, which can be confusing for consumers.
“It is also very difficult for customers to find out what mortgage rate they could pay with another financial institution, without going through a lengthy and time-consuming application process.
“We have evidence that customers can save considerable money by switching providers, and we want to fully understand what the barriers are that stand in their way, particularly barriers created by the banks.”
Anna Bligh, CEO of the Australian Banking Association, whose members include all of Australia’s major banks as well as Bank of China, HSBC and Bank of America Merrill Lynch, said, “Australia’s banks stand ready to assist the ACCC in this inquiry. 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.”