Powered by MOMENTUM MEDIA
SUBSCRIBE TO OUR NEWSLETTER SIGN UP
Powered by MOMENTUM MEDIA

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.

Investor loans to be ‘hardest hit’ by mortgage repricing

scomo scomo
James Mitchell 6 minute read

Mortgages will bear the brunt of the federal government’s new big bank tax, according to one analyst, who believes rate hikes will not be enough to prompt customers to switch lenders.

The surprise levy in Tuesday’s federal budget has widened the rift between government and the banks. All four majors have now publicly slammed the tax, which aims to raise up to $6.2 billion.

ANZ CEO Shayne Elliott labelled the tax a “regrettable policy” and said it is time for Australia’s leaders to “move on from populist bank bashing” and work together with the banking sector to support the national economy.

In a research note, Morningstar analyst David Ellis said that the increase in funding costs to the four major banks and Macquarie will be passed on to borrowers.

Advertisement
Advertisement

“This tax is on all Australian households, with residential borrowers likely to feel the bulk of the burden,” Mr Ellis said.

Morningstar considered the potential impact of further mortgage repricing on customers, who could flock to smaller banks or non-bank lenders.

“We believe the major banks’ strong competitive positions remain firmly entrenched, and collectively, the targeted banks will see little negative impact from customer migration to smaller competitors,” the analyst said.

He added: “The major banks have a long and successful history in coping with profit headwinds, particularly higher funding costs, and we see no difference this time, despite government threats of increased scrutiny on potential mortgage repricing.

“We expect mortgage rates to bear the brunt of future repricing, with interest rates on investor loans likely to be hardest hit.”

PROMOTED CONTENT


Mr Ellis explained that the pricing power of the majors is “alive and well” despite widespread media coverage to the contrary, and stressed that the big four are in no way “on their proverbial knees”.

Morningstar expects the proposed big bank levy to be passed by both houses of parliament.

Australia’s smaller banks have largely supported the initiative. ME chief executive Jamie McPhee said the levy will further “level the playing field”, which the regionals have been calling for since the Murray Inquiry was established in 2013.

“A level playing field is the best means of fostering competition, and producing good value and innovative products into the future.

“Australia’s borrowers and depositors will be the ultimate beneficiaries from a truly competitive environment.”

Morningstar’s Mr Ellis highlighted that while the tax could potentially be positive for the smaller banks, he does not expect any material change to the current competitive position of the banks.

“The changes could lead to greater competition for retail deposits as the major banks increasingly target the levy-free under $250,000 segment, thereby raising the cost of funds for the smaller banks, which are more reliant on this source of funding,” he said.

[Related: Major bank levy will affect borrowers, warns CEOs]

Investor loans to be ‘hardest hit’ by mortgage repricing
scomo
TheAdviser logo

If you have ever considered how you could better service your SME clients but lack the knowledge or confidence to do this beyond referring them on, this is a must-attend event for you. Don't miss SME Broker Bootcamp, a jam-packed, free-to-attend, practical workshop. Register today and secure your place at this interactive, flexible, must-attend event.

scomo
James Mitchell

James Mitchell

James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.

He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.

He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.

James holds a BA (Hons) in English Literature and an MA in Journalism.

 

 

more from the adviser
RBA

Breaking News

RBA makes December cash rate call

The Reserve Bank has declared its last cash rate decision for 202...

digital technology user

Breaking News

Aggregator launches ‘fully digital home loan’

Connective Home Loans has launched a new digital home loan to its...

parliament

Breaking News

Bill to expand First Home Super Saver Scheme delayed

With the final sitting day of Parliament over, the bill expand...