Australia’s biggest lenders are under increasing pressure to lower their mortgage rates independent of interest rate moves by the central bank, as their profits from new mortgages reach the highest level in over a decade, The Australian reported on Tuesday.
An analysis from UBS estimates that the Commonwealth Bank of Australia (CBA), the country’s largest mortgage lender, would see the net interest margin on its home book gain a further nine basis points to 131 basis points in the second half of its fiscal year ending 31 June, rebounding from a year ago when banks were losing money on new mortgages because of the adverse debt markets.
Following strong improvements in funding markets in the last six months and several mortgage repricings, lenders are now profiting more from mortgage origination than at any time before, UBS analyst Jonathan Mott said, as cited by The Australian.
Given the challenging political landscape, with a federal election due in the middle of September, pressure will build up on banks to revise down their mortgage standard variable rates and if they don’t follow suit, political interference can be largely expected as we have seen in other industries with bumpy profits, Mott added.
Fund managers also agree that borrowers would likely see some mortgage relief as funding costs are getting better, while banks questioned the findings of the UBS report.