The ACCC, Australian Competition and Consumer Commission, is being encouraged to dig deeper into IO (interest-only) mortgage repricing by the House of Representatives Standing Committee on Economics.
The ACCC has released three reports on their review of the country’s four dominant banks, as of Thursday, 7 December. The committee proposed further concentration on the industry-wide interest-only repricing from June by investigating the regulator’s current query into residential mortgages.
They are specifically being called on to audit internal documents at the four big banks to ascertain if the rate rises directly resulted from the regulatory requirements of the APRA (Australian Prudential Regulatory Association) regarding IO lending.
The committee suggests that the ACCC evaluate the internal documents of the major banks to gauge if their statements from June 2017 via media releases and the following public commentary are consistent.
Examining the banks’ decisions to increase their rates for existing account holders and customers is of particular interest in this audit. The APRA regulatory requirements were limited to new borrowers only.
Another part of the investigation will look into whether or not the public statements of the big banks sufficiently distinguished between existing and new borrowers. One goal for the ACCC is to discover if the public statements made by the banks imply that rates on existing IO mortgages were increased due to the APRA’s regulations.
A highly detailed analysis of the major banks’ financial models is mandatory, according to the committee, to gain a full understanding of the financial impacts of the APRA regulatory revisions, then compare that data against the public statements presented.
In October, committee hearings were held, where the big banks claimed that the rates were revised (increased) due to the APRA’s new regulatory requirements, and to direct existing mortgage borrowers to switch from interest-only to principal-and-interest loans.
First Choice Mortgage Brokers are a Sydney Mortgage Broker operating under the Australian Credit Licence Number: 382370