ABA rejects claims of home loan gouging

Friday 19 November 2010

Article by Mozo

The Australian Bankers' Association (ABA) has denied media reports claiming that bank margins have increased.

ABA rejects claims of home loan gouging

In a statement, the ABA referred to national newspaper reports that "The big four banks have fattened their margins while complaining about being squeezed, new figures reveal".

According to the body, this is a false conclusion based on a manipulation of newly released APRA data by the Australia Institute (AI), a left-of-centre think tank.

The AI has used APRA figures to argue that the banks were finding it cheaper to borrow money overseas than they were a year ago. Such a contention came amid rising home loan rates by the major banks – moves they attributed to higher funding costs.

However, the ABA said that the figures showed clearly that the claim of margin increases is wrong, with net income margins falling from two per cent in 2009 to 1.9 per cent in 2010.

"The AI's manipulation of APRA data involves a simple but fundamental mathematical error," said Steven Munchenberg, chief executive of the ABA.

Borrowers aiming to secure better deals could opt to compare home loans and consider switching provider. This week, Deloitte economic adviser Dr Henry Ergas told the Australian that the proposed removal of mortgage exit fees could damage competition and see some smaller banks lose their best customers.

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