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Majors accused of ‘anti-competitive’ behaviour

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Reporter 6 minute read

The industry has responded to the “surprising” out-of-cycle interest rate hikes from three of the big four banks, with one major accused of employing “bait and switch” tactics.

The major banks have been critiqued following their out-of-cycle interest rate increases, with Westpac, Commonwealth Bank (CBA) and ANZ lifting rates on their variable owner-occupier home loan products by 14, 15 and 16 basis points, respectively.

HashChing COO Siobhan Hayden accused ANZ of “bait and switch” tactics, after it decided to increase rates five weeks after announcing reductions, adding that she is “surprised” that the big four have lifted rates amid scrutiny from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

“It’s surprising that three of the major banks have increased interest rates in unison, despite being hauled over the coals in the recent banking royal commission,” Ms Hayden said.

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“ANZ’s rate increase is particularly shocking, given it only just announced a rate reduction five weeks ago.

“During a period of clear upward pressure on wholesale funding costs, ANZ announced a 34 basis point reduction in owner-occupied lending for new customers only. Now, just over a month later, it has announced a 16 basis point increase to both residential and investor lending from 27 September.

“This seems like a classic bait and switch. Customers encouraged by ANZ’s rate reduction announcement on the 1st of August would rightfully now feel betrayed and manipulated by a ‘honeymoon rate’ seduction.”

However, in a statement to The Adviser, ANZ noted that its pricing changes would only affect new home loan customers, adding that its discounted rates would still apply to eligible borrowers.  

Ms Hayden also expressed concern over the effect that such increases could have on borrowers, and accused the majors of profit-drive, “anti-competitive” behaviour”.

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“Commonwealth Bank recently reported a full-year net profit of $9.38 billion. Meanwhile, everyday Australians are now at risk of losing their homes because they can’t afford the higher repayments and can’t get bank approval to refinance their home loans. It’s an absolute shambles, and someone needs to take responsibility,” the COO added.

Ms Hayden concluded: “With NAB likely to follow suit, and smaller lenders such as Suncorp and Adelaide Bank already hiking up rates, too, there’s real concern that Westpac’s increase has triggered a landslide across the whole market.

“The anti-competitive behaviour of the big four is certainly something Scott Morrison should look into. It’s un-Australian.”

RateCity money editor Sally Tindall added: “What this rate hike means is that the vast majority of variable rate home owners will now be shelling out more on their mortgage each month.

“NAB would do well to break free of tradition and find a different way to wear the additional expense.”

Further, CoreLogic analyst Cameron Kusher claimed that recent out-of-cycle rate increases on owner-occupied mortgages could place further downward pressure on the housing market, following a decline in demand from investors triggered by macro-prudential regulation and tighter credit conditions.  

“From a housing market perspective, the timing of the announcement of higher interest rates is an interesting one,” Mr Kusher said.

“After many years of strong value growth, Sydney and Melbourne housing is now well embedded in a downturn.”

Mr Kusher continued: “Tighter credit conditions, higher mortgage rates for investors and interest-only borrowers and reduced affordability have already led to the falls of 5.6 per cent from the peak in Sydney and 3.5 per cent from their peak in Melbourne.

“This has occurred so far without higher interest rates for owner-occupiers paying off principal and interest; however, that is about to change.”

The CoreLogic analyst also noted the timing of the rate increases, stating that the changes have been announced amid the start of the “spring selling season”.  

Mr Kusher said that while typically lenders reduce rates in spring to entice borrowers, rising funding costs have left them with no choice but to increase rates.

“Higher mortgage rates have already driven a slowing of demand for investors over the past year. Although the magnitude of the mortgage rate increases announced is fairly small, it is likely that the higher mortgage rates will impact on housing market sentiment.

“[It] may end up further exacerbating the declines which are already occurring in Sydney, Melbourne, Perth and Darwin and the slowing of value growth being experienced elsewhere.”

Mr Kusher concluded: “Overall, this move seems likely to lead to a continuation of the currently weak housing market conditions over the coming months and may weaken the market further. 

“From the lenders’ perspective, clearly they realise that the housing downturn is becoming entrenched and they are doing what they can to maintain profitability in the face of lower mortgage volumes.”

[Related: Three of the big four banks hike rates]

Majors accused of ‘anti-competitive’ behaviour
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