Broker head slams bank rate decisions
A mortgage broking executive has decried the major banks’ decision not to pass on the full Reserve Bank cut.
Australia’s major banks have caused a furore following their decision to pass on only a portion of the Reserve Bank’s 25 basis point cash rate cut. The uproar has culminated in Prime Minister Malcolm Turnbull announcing the major banks’ executives would be asked to appear before the House of Representatives standing committee on economics to explain their pricing decisions.
Mortgage Choice chief executive John Flavell has added his voice to the fray, saying it was surprising to see lenders fail to pass on the full rate cut.
“At a time when the economy could do with the lift that a cut to the cash rate would provide, it was deeply disappointing to hear some of the nation’s largest and most profitable lending institutions announce that only 10 or 13 of the 25 basis point reduction would be passed on to their mortgage customers,” Flavell said.
Australian Bankers Association chief executive Steve Munchenberg last week defended lenders, saying bank funding costs weren’t tied to the official RBA cash rate. But Flavell criticised the “veil of rhetoric” surrounding bank funding costs.
“The reality is, however, if all lending institutions chose an equally profit-focused approach and held back this proportion of the 25 basis point cut, then this equates to something like $2 billion dollars taken out of the pockets of Australian mortgage holders and placed onto the bottom line of institutions that are already generating tens of billions of dollars in profits every year,” he said.
Flavell also criticised the lag between the Reserve Bank cash rate cut and lenders’ rate cuts coming into effect.
“There is no reason why a lending institution cannot pass on rate reductions to their customers as soon as they are announced. By choosing to delay their approved rate cuts, these lenders are further adding to their swelling bottom lines at the expense of their customers.”