From the Real Estate Treasurer:
Banks should not use new requirements to strengthen their balance sheets as an excuse to hike interest rates for home loan customers, Treasurer Scott Morrison has warned.
After warning the banks not to pass on the budget’s bank tax to customers, Mr Morrison said they should not try to increase interest rates on home loans in response to the new capital requirements, as banks did in 2015.
“We already know that the spread between the cash rate and mortgage rates has been widening,” Mr Morrison told BusinessDay.
“I don’t think what is a prudent regulatory policy to promote the strength of our banking system should be used as an excuse to hit customers with bigger costs,” he said.
“Banks that do that have to face their customers.”
Net interest margins have been falling owing to a combination of levies, rising funding costs, slowed loan volumes and a rising regulatory impost. This we know.
Banks should of course pass on the capital impost to increase profitability. In part, that’s what the capital charge is there to do: slow lending.
Even more so with the raised risk-weights to come.
