The Commonwealth Bank of Australia CEO gives his version of Banana-gate to signal mortgage rate increases.
Whether you believe that the banks are paying more for their money or not is irrelevant, Australia’s banks are gearing up to ramp up rates over and above any further RBA mortgage interest rate hikes.
The biggest reason for doing this is not the increasing cost of money, but rather the fact is that they can, and for a few unsettling reasons.
1. No competition. The non bank lenders are a shadow of their former size, and most of the big players have sold out to the banks or have moved out of the mortgage space in the hunt for bigger financial rewards.
2. Australia’s banks can afford to lose customers and still make more money. The big four banks have masterfully grabbed over ninety percent of the home loan business after the Global Financial crisis. If they raise their rates higher than the cash rate increases, that increase will be pure profit, so losing a few percent will be a calculated risk they would like to take.
3. Customers have almost no where to go. All banks will move in-line with the market leader, with maybe the exception of the NAB who seem to have a policy of winning back customers with lower mortgage interest rates, and that may be something that will slow the rate hikes of the other big banks.
4. Swings and round-a-bouts. Greens Leader Senator Bob Brown wants to get a bill through parliament on Community banking fairness.
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Tags: Mortgage Interest Rate, Home Loans, Mortgage Interest Rates
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