The Finance Brokers Association of Australia
(FBAA) has thrown its support behind actions by the Australian Competition & Consumer Commission (ACCC) to investigate how the big banks set rates for their mortgage products.
ACCC chairman Rod Sims made these revelations in front of the House of Representatives Standing Committee on Economics last Wednesday (16 August) when he said the regulator had sent out information notices to the big four and Macquarie.
“We’ve used information notices to seek to understand how banks have made interest rate decisions in the recent past,” he said.
“Are they looking at each other? What are the assumptions they make? How much do they look at small regional banks?”
The ACCC was also examining how much banks rely on the Reserve Bank of Australia’s (RBA
’s) official cash rate when setting mortgage rates, whether they consider other influencers, and how they measure profitability against the interest of consumers, Sims said.
FBAA executive director Peter White said he was pleased the ACCC had decided to act.
“We applaud the ACCC for eventually doing its job in this regard, as we realised months ago there was a real possibility of the big banks passing the cost of the new bank levy on to its customers.”
The FBAA called for the ACCC to investigate rate movements back in June
. At the time, the ACCC told Australian Broker
it was creating a Financial Sector Competition Unit to undertake regular enquiries into the bank sector – including a one-year price inquiry into residential mortgage products.
Recent rate movements have seen rates for investor and interest only loans shoot up by up to 66 basis points with little explanation as to why, White noted.
“Some of these rate increases are extraordinary and the Australian public deserves to know what’s going on,” he said.
“The emphasis now is on the banks to justify their decisions to increase rates and maintain consumer trust in the bank sector.”
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