The fund reportedly set up by the big four banks to discount loans has been slammed by the FBAA as a move to generate a “huge profit”.
Executive director of the Finance Brokers Association of Australia (FBAA), Peter White, made the comments after the Australian Finance Review claims that the big four banks had created a $600 million fund between them to offer rate discounts to prospective borrowers seeking residential loans.
However, Mr White was sceptical about the motives for establishing the fund.
He said: “Nothing comes for free and if it seems too good to be true, it probably is.”
“If what is being reported is the case, then this in essence enables the banks to buy business to increase their databases and profits.
“They will also cross-sell insurance and financial planning, plus a whole swag of other products.”
Mr White claimed that the scheme is intended to boost the lenders’ bottom line and “benefit shareholders”.
“Once you’re on the hook, the big banks increase the margins on their existing loan books and make a huge profit to benefit their shareholders, their own jobs and pockets.
“Cheap introductory interest rates with lenders has been going on forever and this, if it is the case, is just a current variation of the theme.
“They aren’t giving away $600 [million] as such without a pay day.”
Earlier this week, Mr White welcomed moves from non-banks to drop interest rates but said that he was “disappointed” that major banks haven’t followed suit.
“It is good to see the non-banks, second-tier and small lenders supporting home borrowers,” Mr White said.
“But at the same time, it is disappointing the big banks, like ANZ, seem disinterested in trying to work with borrowers by doing the opposite and putting their rates up.”
The FBAA executive also warned banks not to “stab borrowers in the back” with “unjustified” rate rises.
“We hope in 2018 the big banks remember where their profits come from, and that is borrowers,” the executive director added.
“And we encourage the banks not to stab borrowers in the back with out-of-cycle interest rate movements or unjustified fee hikes.”
[Related: Industry body urges big banks to drop rates]