National Australia Bank (NAB) group chief executive officer Andrew Thorburn recently warned that the introduction of tracker mortgages would intensify the risks faced by the financial system. His warning came after Prime Minister Malcolm Turnbull hinted that cabinet might consider legislating mortgage trackers if recommended by parliament’s bank inquiry committee.
Tracker mortgages—which are variable-rate home loans with interest rates that rise or fall in line with a benchmark rate (such as those set by the Reserve Bank)—were a focus of the house economics committee’s banking inquiry this month. The loan products have won support from ANZ chief Shayne Elliott and Australian Securities & Investments Commission (ASIC) chairman Greg Medcraft.
Thorburn believes that regulating pricing “would be a dangerous step,” a sentiment echoed by Australian Prudential Regulation Authority (APRA) chairman Wayne Byres.
“We don’t fund our mortgage book off the cash rate — we never have,” Thorburn told radio presenter Neil Mitchell on 3AW. “We’re not keen on [tracker mortgages] because it does increase the risk for the bank; because it links it to a rate that we do not fund off.”
Prime Minster Turnbull, who also spoke on 3AW before Thorburn, said the introduction of tracker mortgages was “a question that needs further discussion,” noting that any recommendations from the house economics committee would be carefully examined before they’re implemented.
Collections: Mortgage News