The banks were accused of accomodative pricing behaviour.
Reuters reports that Australia’s Big Four banks were able to generate over $792m (A$1.1b) in revenue by lifting rates on interest-only mortgages following a regulatory reform in a move characteristic of ‘accommodative pricing behavior’, the country’s competition watchdog said.
The government capped new interest-only mortgages in 2017 in a bid to cool the heated housing market but Commonwealth Bank of Australia, Westpac, Australia and New Zealand Banking Group and National Australia Bank used the reform as an ‘excuse’ to charge interest-only borrowers more, the Australian Competition and Consumer Commission said in a report.
“Despite the interest-only benchmark applying only to new interest-only residential mortgages, the (banks) all followed ANZ’s decision to increase interest rates for both new and existing interest-only residential mortgages,” ACCC said.
The Big Four banks account for roughly 80% of the country's mortgage market.
It was also discovered that banks on average charged new customers with interest rates up to 32 basis points lower than existing customers. “Pricing for mortgages is opaque and the big four banks have a lot of discretion. The banks profit from this and it is against their interests to make pricing transparent,” ACCC Chair Rod Sims said.
The Australian banking sector faces intense scrutiny following a probe by the Royal Commission surfaced damning evidence of systemic wrongdoing by the country’s big banking players which range from charging fees to the dead forging documents and lying to regulators.
Here’s more from Reuters:
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