fbpx
Skip to main content
Tropical Cyclone Seroja: Emergency Assistance

ABA supports APRA comments on rate tracker mortgages

15 October 2016

Sydney, 14 October 2016: The Australian Bankers’ Association has supported today’s comments by Chairman of the Australian Prudential Regulation Authority, Mr Wayne Byres, about the concerns of mandating rate tracker mortgages for all authorised deposit-taking institutions.

“Mortgages with interest rates tied to movements in the cash rate do not offer the best outcomes for customers, the banking industry or the Australian economy,” ABA Chief Executive Steven Münchenberg said.

“The RBA cash rate is only one of many factors which goes into the cost to banks of providing mortgages. 

“Other funding costs, especially those sourced offshore, change independently of the cash rate. This means banks need to factor in the likelihood of these funding costs rising, and build in a higher buffer when setting a tracker mortgage rate. Customers will end up paying more than they otherwise would be with a typical home loan.

“In Australia, a large part of bank funding comes from overseas. Requiring banks to offer a rate tracker mortgage that follows movements in the RBA cash rate, rather than the actual cost of funds, would add considerable risk into the banking system.”

Mr Münchenberg said the idea of legislating to require banks to offer rate tracker mortgages was previously proposed by former Greens Leader Bob Brown in 2010 and did not pass the Parliament. 

“While banks are supportive of any product which improves customer outcomes, regulating rate tracker mortgages would only result in higher costs for banks and customers,” he said.

Mr Münchenberg said it was important to note that many tracker mortgages offered overseas are not for the life of the loan, as they typically revert to a standard variable rate after two, three or five years and are offered in order to attract customers.

ENDS

Contact: Stephanie Arena 0477 470 677 or Nic Frankham 0435 963 913

@austbankers

bankers.asn.au

Latest news

1 / 3
Media Releases
Banks unite to help customers experiencing financial abuse
4 April 2021

Australian banks are launching updated guidelines on financial abuse as part of their continued focus on responding to family violence and elder abuse.

Read more
Media Releases
Banks call for consistent laws to prevent elder abuse
31 March 2021

Australian banks are urging state and territory governments to adopt consistent laws on powers of attorney to prevent elder financial abuse.

Read more
Media Releases
Support available for customers affected by NSW floods
21 March 2021

Australian banks are supporting communities in New South Wales after torrential rain and floods in parts of the state.  Floodwaters have inundated towns on the NSW North Coast, Sydney has been pummelled by heavy rain and more is forecast in coming days.  Australian Banking Association CEO Anna Bligh says banks have a range of measures… Read more »

Read more