ACCC urged to look into IO rate repricing

by Miklos Bolza11 Dec 2017
Recommendations for the Australian Competition and Consumer Commission (ACCC) to delve further into interest-only mortgage repricing have been tabled by the House of Representatives Standing Committee on Economics.

In its third report on the review of the four major banks released on Thursday (7 December), the committee proposed an added focus on June’s industry-wide IO repricing with the investigation falling under the regulator’s present inquiry into residential mortgage products.

In particular, the ACCC has been called upon to examine internal documents at the four major banks to determine whether they align with claims that rate rises were a direct result of regulatory requirements introduced by the Australian Prudential Regulatory Association (APRA) around interest-only lending.

“The committee recommends that the ACCC analyse the banks’ internal documents to assess whether or not they are consistent with their statements in their June 2017 media releases and subsequent public commentary.”

In particular, the ACCC has been urged to examine the banks’ decisions to increase rates for existing customers despite APRA’s speed limit only targeting new borrowers.

“Further, the ACCC should consider whether the banks’ public statements adequately distinguish between new and existing borrowers. The ACCC should consider whether the media statements suggest rates on existing interest-only mortgages rose as a direct consequence of APRA’s regulatory requirement.”

Granular analysis of the banks’ financial modelling is required, the committee wrote, in order to understand the financial impacts of these regulatory changes and compare that impact against any public statements made.

In committee hearings held in October, heads from the major banks said that rates were changed for two reasons: APRA’s regulatory requirements and to encourage existing borrowers to move from interest-only to principal-and-interest.

Related stories:

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Competitors influenced IO rate hikes: CBA

Rate hike profits to be short lived: NAB