SYDNEY – Australia’s major banks have made extra profit with their mortgage loans, taking advantage of the lack of transparency and freedom to set their prices, the regulating authority said Tuesday.
“Pricing for mortgages is opaque and the big four banks have a lot of discretion,” the Australian Competition and Consumer Commission (ACCC) Chair Rod Sims said in the report.
“The banks profit from this and it is against their interests to make pricing transparent,” Sims added.
“Borrowers may not be aware they can negotiate with their lender on price, both before and, particularly, after they have established their mortgage,” the report says.
The commission analyzed the prices charged by the four largest banks in the country, ANZ, Commonwealth, NAB and Westpac, in addition to Macquarie Bank, all affected by a government levy between May 9, 2017 and June 30, 2018.
The tax of 0.015 percent was imposed from July 1, 2017 on financial institutions with more than AU$100 billion ($71,878 billion) of liabilities, which affected these five banks which together control 80 percent of the country’s mortgage market.
Since June 2017, when the four main banks began to raise the price of their mortgages, they made profits of more than AU$1.1 billion ($790 million) in the fiscal year that ended in June 2018, mainly due to this increase.
However, the ACCC said it has not found evidence that the five banks changed their prices specifically to recover the cost of the levy, whether in part or in full.
The report coincides with the investigation of a commission on the bad practices of the banks and other financial institutions in Australia, which has, in a preliminary report published in September, accused them of abusing their clients and being led by “greed.”