Banks should not be creating our reality

Apparently there is a ‘new reality’ in mortgage banking, says the ANZ’s head of domestic operations, Fred Ohlsson.

Mortgage lending rates will be set by a ‘multi-tiered approach’; there are ‘portfolio risk considerations’ for the banks.

We are being softened up for an Australia where mortgage rates are raised outside the traditional cycle following the Reserve Bank’s assessment at its monthly meeting.

Well, I don’t know about the banks, but a lot of ordinary Australians will be feeling some ‘portfolio risk considerations’ of their own at this direction being taken by the banks.

The talk is positive on the one hand – create different products and rates for different customers and their needs. Great!

And negative on the other hand – our home loan rates will be off the leash. Ok...

When you do the sums, this financial trend means one thing: uncertainty for families planning their spending and budgeting, and also for investors (a major source of rental accommodation).

Looking at the Big Four banks, we now have the CBA and ANZ with a standard variable rate mortgage at 5.25 per cent, while the NAB and Westpac are at 5.32 per cent.

The future for home loan interest rates is for what one commentator calls ‘nano-hikes’. Mortgage rates are now ‘fluid’.

If this affected your credit card rate, or the fees on a personal loan, for example, such flexibility (on the part of the banks) might attract less concern. Indeed, you might expect that product comparison websites and competition between lenders would deliver innovative products and affordable options.

Do the same thing with home loans and the impact could be far reaching because household stability is in play and at risk. 

It is not an easy thing to switch lenders when you have a mortgage to discharge and all the associated accounts and cards to cancel. We are not ‘fluid’ in response.

In the year to March 31, home prices climbed 18.9 per cent in Sydney and 15.9 per cent in Melbourne. That’s a problem.

Financial regulators are expressing their fears of a housing price bubble. Governments and Oppositions are looking for policies to limit housing investment and perhaps change the property tax regime.

Again, unsettling home owners, those planning to buy their first home and those saving for their future via property investment.

It seems like every financial commentator or expert is expressing the need for calm and caution – while simultaneously almost urging on a spectacular bursting of the bubble.

Bank profits may be down a little for some, but the Commonwealth Bank’s statutory net profit after tax (NPAT) for the six months ended 31 December 2016 was $4,895 million - a six per cent increase on the prior comparative period.

I ask: how much profit is enough?

Our banks are in a privileged place in society thanks to their customers, shareholders and government. A sweet spot.

Is it up to the banks to tell everyone there is a ‘new reality’ in town, implying we have to get used to it? (Americans didn’t do so well when their banks roared away, did they?)

But do you get the feeling here that, almost like young children, the banks sense the Reserve has lost the tenacity of its grip on mortgage rates, and they are probing every opportunity to see how far they can go before someone in (prudential) authority yells ‘Enough!’?

Greg Aplin is a NSW MP for Albury.