Banks Should Match RBA
Banks would have to offer home loans that track the movements of the Reserve Bank of Australia cash rate, under proposals recommended by a parliamentary committee.
The House of Representatives economics committee’s Better Competition, Better Prices report has made 44 recommendations including the suggestion that the government co-operate with banks to trial “tracker mortgages”.
These types of mortgages are offered in the United States already and the report said they reduced the likelihood of “disengaged consumers drifting away from the best available rate”.
Banks have previously raised concerns about the product because when interest rates are on the way up it can reduce their profitability and they have concerns about the effect on the stability of the financial system.
The committee also suggested that the Treasury’s competition task force increase consumer engagement with mortgages and deposit products.
It says banks could be made to notify the base deposit interest rate at the end of the introductory period, clearly notifying deposit holders of changes to interest rates, changes to eligibility bonus interest, and alerting customers when they are approaching a minimum balance level eligible for a bonus interest rate.
