Greens propose capping mortgage rates, curbing bank profits

Should the Greens win power following the upcoming federal election, they will introduce legislation to require the five largest banks (ANZ, CBA, Macquarie, NAB, and Westpac) to offer a discount mortgage called HomeKeeper to all home owners, including first home buyers and owner-occupiers.

HomeKeeper mortgages would be set at a regulated ceiling of no more than 1 per cent above the cash rate, effectively legislating a cap on the profit a big bank can make on this mortgage product.

The Greens envisage that the HomeKeeper mortgage would be available to any owner-occupier, whether or not they are a first home buyer (but would exclude investment properties, commercial premises, and holiday homes).

They said that existing mortgagors would also be able to transfer into HomeKeeper at their own choice.

The Greens have said that they would also provide support to smaller banks so that they can offer a similar low-rate product without being financially disadvantaged.

According to the party, the move aims to “stop banks ripping people off, and ensure the big banks don’t unnecessarily overcharge”, noting the modelling by The Australia Institute that the major banks make around $200,880 in profit over the lifetime of a 30-year loan.

Indeed, The Australia Institute said that the majors made aggregate pre-tax profits of $44.6 billion, making around $17.6 billion profit from households with owner-occupier home loans in 2023–24.

The Greens said that while the current cash rate is 4.35 per cent, the Reserve Bank of Australia lists the average owner-occupier variable housing rate as 6.3 per cent for new loans or 6.4 per cent for outstanding loans.

As such, banks are reportedly making a margin of between 1.95 per cent and 2.05 per cent.

‘Stop the price gouging and profiteering’: Greens

The party said that banks would make “a more reasonable profit” under the HomeKeeper model and would have the added benefit of easing mortgage stress for home owners while providing borrowers with more cash in their pockets for other expenses.

The Greens said: “The latest average new mortgage size is $589,560, meaning for a new mortgage holder, a reduction in their interest rate from 6.3 per cent to 5.35 per cent would be equivalent to almost four interest rate cuts by the RBA, with a saving of up to $357 per month, or up to $4,284 per year.

“For someone with an $800,000 mortgage, the cut of almost a percentage point would be equivalent to monthly savings of up to $484 and annual savings of up to $5,814.”

Speaking of the HomeKeeper policy, Senator Nick McKim, the Greens spokesperson for Treasury, said that he hoped it would “stop the price gouging and profiteering”.

He said: “For too long, big banks have been ripping people off by charging interest rates well above the cash rate.

“The big four banks are crushing mortgage holders. They are currently making billions of dollars in profits ripping off struggling mortgage holders by overcharging them on their mortgage.

”For the average home loan, $761 per month is pure profit for the major banks.

“This policy will reduce the costs of mortgages for everyone by limiting the amount at which banks can rip people off.”

McKim said he believed no one should have to pay more than 1 per cent over the current cash rate for their mortgage, adding: “[I]t’s immoral that people are being forced out of their homes while banks are making billions in profits.

“This policy will stop big banks charging more than is absolutely necessary to provide a mortgage product to people struggling to keep a roof over their heads, and it will stop the big banks’ super-profits made from mortgages.

“After the next election, we’ll almost certainly have a minority parliament and this is part of the Greens plan to work with Labor to help renters and people with mortgages.

“If you want change, you have to vote for it, and the first step is to vote for someone who is fighting for you.”

What are the other parties doing on housing?

The Albanese government has also committed to a range of new measures aimed at improving home ownership affordability, including having recently passed the shared equity scheme, Help to Buy.

Under Help to Buy, low- to middle-income earners will only be required to have a deposit of 2 per cent (or more) to qualify for a standard home loan with a participating lender without needing to pay lenders mortgage insurance (LMI).

The Commonwealth would provide an equity contribution to eligible participants for up to 40 per cent of the purchase price for new homes and up to 30 per cent for existing homes, which will be recognised as a second mortgage (or other right secured against the property).

The scheme – which will be administered by Housing Australia – will be means-tested (income limits are $90,000 for singles and $120,000 for couples) with property price caps for each city and region.

Other initiatives include Build to Rent, new tax breaks to support the construction of around 80,000 new homes to rent, as well as continuing existing schemes, such as the Home Guarantee Schemes (currently used by one in three first home buyers), the Social Housing Accelerator and the Housing Australia Future Fund, and its broader National Housing and Homelessness Plan.

Meanwhile, the Liberal Party has said that if the Coalition would win power, it would:

• Increase supply by unlocking 500,000 new homes with $5 billion investment in essential infrastructure (water, power, sewerage, etc).

• Suspend changes to the National Construction Code for 10 years to reduce compliance costs.

• Reduce migration.

• Introduce a two-year ban on foreign investors and temporary residents purchasing existing homes.

• Allow Australians to access up to $50,000 of superannuation for first home purchases (with the amount to be returned upon sale).

[Related: Senate inquiry recommends reducing 3% serviceability buffer]