The head of a major aggregator says the big banks have plenty of ways to absorb the government’s $6.2 billion levy other than hitting mortgage customers with a rate hike.
General manager of lending for Vow Financial Clive Kirkpatrick told The Adviser that the first bank to lift rates in response to the government’s actions will have “hell to pay”.
“The banks have more than one stakeholder involved. The only way they can absorb this tax is by sharing it with either the customer, shareholder or staff member,” Mr Kirkpatrick said.
“To say that the customer will need to bear the uplift is just not right. I heard the Treasurer say that surely out of $35 billion in profit they can absorb $6 billion,” he said. “There are many alternatives available to the banks. The first bank to pass on that tax to the customer will have hell to pay.”
The former head of St. George Bank’s third-party division wrote to Vow Financial brokers last week explaining the potential impact of some of the measures announced in the federal budget. He noted that the bank levy, which applies to Macquarie as well as the big four, could certainly drive up lending costs.
“Fortunately, we have multiple funding sources, so we can continue finding the best deals for our customers,” Mr Kirkpatrick said.
The ACCC has been tasked with holding the major banks to account over their home loan pricing decisions.
The commission’s new Financial Sector Competition Unit will be tasked with undertaking regular inquiries into specific competition issues across the financial sector, starting with a one-year price inquiry into residential mortgage products, which will run until 30 June 2018.
As part of this inquiry, the ACCC can compel the major banks to explain any changes or proposed changes to fees, charges, or interest rates in relation to residential mortgage products affected.
However, Mr Kirkpatrick believes the ACCC alone may not have enough power to prevent the big four from lifting their rates.
“But if you combine the strength of the customer bases, the government and the media, that is far more powerful than a single government body,” he said.
“Opinion is a big driver of behaviour. I think the first one to move will see customers vote with their feet. There are plenty of other alternatives.”