Time for banks to hand back windfall from out-of-cycle increases
Average borrower down $400+ due to hefty home loan hikes
CHOICE says whatever the RBA decides on interest rates on Tuesday, it’s now time for the big four banks to start returning to households the extra interest they've paid because of out-of-cycle hikes on mortgage rates.
The consumer group says the banks should not only pass on in full any possible cut to the cash rate, they should go further by making good for a full year of excessive increases to mortgage rates.
The average home loan is now $288,300 and with this amount of debt on a standard variable rate households have each paid an estimated $432 in extra interest.
“Instead of any hesitation from the banks to immediately pass on in full any possible cut to the RBA’s cash rate they need to go further and return to the state of play that existed before last year’s unjustifiable increases,” says CHOICE head of campaigns, Christopher Zinn.
On Melbourne Cup Day last year, the CBA raised its rates by almost double the official increase of 0.25% with the other major banks soon following suit.
On average, the big four raised rates by 15 basis points more than the RBA, blaming the cost of overseas funding.
However, CHOICE says the big four banks have increased their deposits from households by more than $20 billion in the last year, providing an important additional source of funding.
The margin between the banks’ standard variable rate and the RBA cash rate has increased in the banks’ favour from 2.6% in Dec 2009 to 3.05% in November 2010 where it currently remains.
Read more on CHOICE’s Better Banking Campaign.
• Christopher Zinn, director of campaigns - 0425 296 442
• Matt Levey – head of campaigns – 0488 214 066