Discounts a ‘sign of light’ for mortgage industry

by Caroline Dann12 Jul 2012

Recent discounts on standard variable rates are finally leading to profitability for banks, according to an RBS report.

It shows ANZ, CBA and NAB’s lowering of mortgage discounts in the last six months has yielded a return on equity of 20% to 30%. 
Most lenders are offering further discounts on advertised standard variable rates to those seeking bigger loans. 
In September last year, ANZ and CBA offered a 0.90 percentage point off their standard variable rate, while NAB offered a 0.75 percentage point reduction.
The report found most banks are now offering a reduced level of discount to boost profitability, at an average of 0.7% across their variable loan offerings.
It’s a “sign of light” for the mortgage industry, and shows banks “clawing back margins on loans lost to higher funding costs,” said RBS analyst Andrew Lyons.
“Mortgage profitability has been progressively increasing, characterised by out-of-cycle rate rises and a reduction in front book discounts,” he said.
The profitability was contributed to by most banks’ refusal to pass on all of the RBA interest rate cuts this year.


  • by John Robbo 12/07/2012 10:22:40 AM

    "Finally leading to profitability for banks"????? They have recorded all time record profits. Why would they insult us with this unadulterated rubbish. When their margins are squeezed they increase fees as seen in the last few years. Now they have higher fees & higher margins. What a joke! The banks don't deserve our business.