The Finance Brokers Association of Australia (FBAA) has called on the federal government to take strong action to ease the massive financial and mental health pressures experienced by Australians following 11 interest rate hikes in 12 months.
“We believe that the number and size of these rate rises over such a short time frame could result in even worse economic and social outcomes than the problem the RBA was attempting to address,” said FBAA managing director Peter White (pictured above) in a recent letter to the treasurer and minister for financial services.
A recent survey commissioned by the association revealed that a large percentage of Australians with a mortgage and who are renting were being forced to make major financial sacrifices, sell assets, take on additional work, and move to cheaper properties, while an increasing number were seeking mental health assistance as a direct result of interest rate stress.
“All of us – the community, lenders, and government – must work together to address this financial and mental health emergency, but the banks can’t be trusted to do this without government pressure,” White said.
The FBAA urged RBA to pause interest rate hikes for three to four months until the true impact has been evaluated. It also urged the government to compel banks to disclose the introductory/new borrower rate, as well as the current existing (back-book) borrower rate.
The association is also calling for an immediate government inquiry into bank practices around the issue of disclosure, to protect borrowers and vulnerable markets. Lastly, it proposed that APRA reduce its 3% loan serviceability buffer for mortgages to 1.5% to 2% which it said was more appropriate in today’s economic environment.
Too many vulnerable borrowers were being lured by banks into a seemingly better interest rate deal, only to discover the increase in their rate and payments once they were deemed an “existing” borrower, White said.
“It is vital that new borrowers see this difference – which can be around 0.5% – so they are financing or refinancing with full awareness,” he said. “The Hayne Royal Commission placed a significant emphasis on banks being transparent, and banks should be forced to disclose both rates in all advertising, promotions and communications to their new and existing borrowers.”
White said that while he welcomed the decision by some banks to drop their cashback offers to new borrowers, it was not enough.
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