New report asks ACCC to examine interest-only mortgages

By Michael Mata

Report asks ACCC to examine interest-only mortgages

The House of Representatives Standing Committee on Economics’ latest report on their review of the Big Four highlighted, among other issues, interest-only mortgage pricing.

The committee wants the Australian Competition and Consumer Commission (ACCC), as part of its inquiry into residential mortgage products, to assess the repricing of interest-only mortgages that occurred in June.

While the banks’ media releases state that their rate increases on mortgage products were primarily or exclusively due to the Australian Prudential Regulation Authority’s (APRA) latest regulatory requirements, the banks admitted under scrutiny that other factors contributed to their decision – including the desire to boost profitability.

As of October 6, analysts at CLSA estimated that the banks’ net interest margins had increased by up to 12 basis points following their rate increases on new and existing interest-only loans in June and March.

The ACCC is currently conducting an inquiry into how the major banks set interest rates on mortgage products. The inquiry was established to monitor pricing decisions following the federal government’s introduction of a $6.2bn bank levy, to ensure that the banks do not pass on the costs of the levy to consumers.

The inquiry will examine changes to pricing until June 30, 2018.