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Following AMP’s move to reduce some borrower discounts, the associations have urged lenders to ‘think carefully’ about how they are impacting already burdened borrowers.
The broker associations have urged caution to lenders adjusting interest rates outside of the central bank changes amid growing concerns for mortgage borrowers.
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The comments came after brokers hit out at AMP Bank for reducing its margin adjustment for some new clients at the same time as passing on the central bank’s recent 25-bp hike this month.
Over the past two weeks, the lender has been informing some new-to-bank customers that the interest rate on their variable rate loans has increased as a result of the Reserve Bank of Australia (RBA) increasing the cash rate this month, but also as a result of a change in the borrower’s discount rate.
This is believed to impact customers who had interest rates that were “below market home loan rates” and means that some borrowers are seeing rates increase by more than 40 bps.
Speaking to The Adviser following the move, the managing director of the Finance Brokers Association of Australia (FBAA), Peter White OAM, flagged that lenders should be more transparent when offering discounts, particularly if they are only going to apply for a ‘honeymoon’ period.
He told The Adviser: “This is fundamentally wrong ... It’s the lack of transparency that is the issue. I’ll call BS on that. In the good old days, we used to have honeymoon rates and everyone understood what it was and what it meant. It was completely transparent.
“They need to be transparent with the truth if they expect people to trust them, that includes the broker market and borrowers.
“This style of thing is garbage, needs to be booted, and needs to play fair for consumers around the country. Because all this does is burn consumers and burn their reputation with brokers.
“There has to be a disclosure – because without that, they’re deceiving consumers and it’s wrong.”
Mr White suggested that lenders should therefore be clearer in their advertising, target market determinations, and design and distribution obligations regarding margin rates and outline if any discounts are temporary and the duration of the discount period.
The chief executive of the MFAA, Anja Pannek, told The Adviser that while the body “understand[s] that there are many factors that lenders have to consider in making decisions to increase home loan interest rates”, including market conditions, competition in market, and the management of internal costs, she added: “We expect lenders to also consider the impact of decisions like this on both our members and their customers.
“We know from a survey of our members earlier this year that our members’ clients are more concerned about meeting repayments now than they were at the beginning of the year.
“In making these decisions, we encourage lenders to think carefully in terms of the impact to customers who have already experienced a significant increase to the mortgage repayments following 13 rate rises in the past 18 months, on top of rising costs of living.”
[Related: Broker clients reeling as lender slashes discount rate]
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