Since the bank levy was announced at the federal budget, the major banks and some industry bodies have stated the costs will be passed on to the consumer. The major banks raised their concerns in submissions to Treasury earlier this month.
The Australian Bankers’ Association argued that the budgetary measure was “rushed” and “not in keeping with the government’s own best practice guidelines”. From the Treasurer’s ‘tough luck’ reaction, it’s likely he interpreted their ‘concerns’ as “please don’t take our profits” and “why won’t someone think of the executive salaries… oh, I mean shareholders and customers?!”.
Treasurer Scott Morrison delivered a speech at Parliament House on Tuesday where he revealed that the first payment of the major bank levy will be pushed back by three months to 21 March 2018 to help with their ‘concerns’.
Westpac, CBA, ANZ and NAB turning business away
Over the last 12 months we’ve seen tightening of lending policy and product offerings from many lenders, both the majors and the second-tier lenders. These changes are generally cyclical and a reaction to housing affordability, particularly in Sydney, and APRA restrictions. We’ve received updates from Westpac, CBA, ANZ and NAB this week advising of changes to mortgage policy. These changes essentially mean the big four banks are being very selective on who they lend to. For example, Westpac will reduce the maximum LVR to 80 per cent on new and existing interest-only (IO) lending.
The maximum LVR (inclusive of any capped mortgage insurance premium) for customers making IO repayments will no longer be accepted above 80 per cent. This applies to new loans (originations) and loan increases. That means they will only accept home loan borrowers who have a minimum of 20% deposit to contribute.
Home loan borrowers set to get a better deal
The government is confident that the bank levy on the major banks will help create more opportunities for second-tier lenders and credit unions. We’re already seeing some of the best home loan deals come into the market from second-tier lenders.
One lender is offering an amazing 1 and 2-year fixed interest rate of 3.64% on owner occupied properties on principal and interest repayments. And for those who prefer variable interest rates, they’re offering 3.84%. Whilst these interest rates have a maximum of 80% LVR, there are still lenders offering 95% LVR (inclusive of LMI) for investors! That means for investors who have limited cash for a deposit can still get into the property market, as long as they are willing to consider a second-tier lender.
Major banks – big brother is watching
It’s clear the government won’t be bullied by the banks and whilst they have offered a small concession on delaying the inevitable, the Treasurer said “The major bank levy does not give any bank an excuse to increase costs for their customers”, and the ACCC will be watching. “The ACCC will be able to use its information-gathering powers to obtain and scrutinise documents from any bank affected by the levy and to report publicly on its findings,” Mr Morrison said yesterday.