Home loan borrowers to be stung with higher monthly repayments due to bank levy
HOME loan customers are expected to be hit by rogue interest rates costing them hundreds of dollars extra each year after the bank levy announcement.
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EXCLUSIVE
HOME loan customers are expected to be hit by rogue interest rates slamming them hundreds of dollars extra per year as the nation’s big banks look at ways to cover the cost of the banking levy.
Within days of the four big banks making their massive profit announcements, Federal Treasurer Scott Morrison revealed he would hit the five largest lenders with a bank levy that would rip $6.2 billion from them.
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But new analysis has revealed the banks will be left with the looming task to generate additional revenue to fill the void of the new tax.
Data from financial comparison website Mozo found if the banks collectively paid a $1.6 billion levy annually over four years they would be required to generate an additional $2.3 billion in pre-tax revenue to cover it.
On an average $300,000 home loan lenders this would hit customers with an extra 21 basis points on their mortgages, costing them an additional $40 per month.
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Despite the banks being warned not to pass on the cost directly to customers, the big bank bosses have said customers and shareholders will be stung.
Mozo spokeswoman Kirsty Lamont said property investors would be among those to “wear the brunt of rates hikes” and urged borrowers to look beyond larger lenders for better deals.
“We are predicting the banks will try to hike variable rates to make up for the profit loss of the banks’ levy, they have not been slow to hike rates in the past,’’ he said.
“We could see incremental increases in the lead up to July 1 when the bank levy comes into force or the banks could do it in one go, the banks will obviously look at the political landscape and try to not attract as much as public attention as possible.”
On a $300,000 30-year home loan the average variable rate is 4.45 per cent and monthly repayments are $1511.
On a three-year fixed rate the average rate is 4.14 per cent and monthly repayments are $1457.
Independent economist Saul Eslake said he expects the Reserve Bank of Australia said to keep the cash rate on hold and while owner occupiers could be spare rate hikes it won’t be the case for investors.
“The banks could raise interest rates by five basis points here and there,’’ he said.
“I think it could be a good thing if demand for mortgage investors was dampened and that would do more to promote home ownership than anything that was in the Budget.
“A fairly substantial portion of the increase of the tax on banks will either be borne by bank employees by being sacked and the banks cutting their costs or alternatively by profits which affects shareholders and most Australians through their super funds.”
The government has also said the Australian Competition and Consumer Commission (ACCC) would undertake a residential mortgage pricing inquiry for the next year.
sophie.elsworth@news.com.au
Originally published as Home loan borrowers to be stung with higher monthly repayments due to bank levy
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