Morrison moves to investigate “profiteering” banks
Less than one year after the Royal Commission into Financial Services, the big banks and other mortgage lenders face a new government inquiry.
Today the federal treasurer, Josh Frydenberg, directed the Australian Competition and Consumer Commission (ACCC) to start an inquiry into the pricing of residential mortgage products. This follows the banks not passing on the full amount of the RBA’s three recent rate cuts and some withering criticism of the big banks by the prime minister Scott Morrison last week.
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“The banks have decided to put their profits before their customers,” Mr Morrison told ABC last week.
“That’s not a good outcome for their customers and it is not a good outcome for the economy.”
Mr Morrison urged Australians to “shop around and get the best possible deal.”
On Wednesday, the prime minister appeared on Sky News TV and said the banks are ‘profiteering.’
“They never learn, they honestly never learn and it is disappointing,” said Mr Morrison, “Mortgage holders … have reason to be disappointed in the banks, basically, profiteering.”
Smaller banks and non-bank lenders will also be included in the inquiry which will look at difference in prices for new and existing customers, differences between reference rates and actual rates and mortgage switching.
Josh Frydenberg said the inquiry will:
- Investigate the prices charged for residential mortgages across the entire market of home lenders,
- Consider how banks set rates and pass on movements in the RBA’s official cash rate,
- Examine differences in rates for new and existing customers,
- Examine differences between the advertised ‘reference interest rates’ of banks and the actual rates paid by customers,
- Investigate barriers preventing borrowers switching lenders.
The ACCC will deliver a preliminary report by the end of March 2020, before the government delivers its budget in May.
“This is an important opportunity to discuss the challenges of an increasingly low interest rate environment,” said National Australia Bank’s Chief Customer Officer for Consumer Banking, Mike Baird, “and engage in a broader discussion about how we support all our customers – both depositors and borrowers.”
ANZ Bank’s chief executive Shayne Elliott said banks have not properly explained their rate cuts.
“The inquiry is a good opportunity to provide facts in what is a complex space,” said Mr Elliott, “We hope it will provide the public with renewed confidence in the way their home loans are priced.”
Last week, the treasurer Josh Frydenberg said he was deeply disappointed the banks did not pass on the full amount of the RBA’s October rate cut to borrowers.
“They ignore the advice of the independent Reserve Bank of Australia and thumbed their noses at Australian consumers.
“Banks should never be increasing their profits at the expense of their customers,” said Mr Frydenberg.
Australians who are unhappy with their bank should seek out the best deal elsewhere and be prepared to switch said the treasurer.
“The best way for the banks to get the message is for customers to seek the best possible deal,” said Mr Frydenberg.
“If they do not get it from their existing credit provider, then to go elsewhere.”
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