Big banks may end discounts on mortgage rates

Australia’s major banks may put an end to discounts on mortgage rates as they look to recover higher wholesale funding costs, it has been suggested.

ANZ’s Australian chief executive, Phil Chronican, noted that the banks are already beginning to make changes to their mortgage packages in order to tackle the current margin squeeze.

Speaking to the Australian, he said it was likely banks would look to restructure the "value-based pricing" of mortgages, which could include reducing the discounts on the average standard variable rates offered to some new and existing customers.

"If you look at it recently, what you have seen in the market is people rejigging their brokerage commission rates . . . that’s the way the market has moved," he added.

As the newspaper observed, ANZ has lost about $40 million through rising wholesale funding prices and the current competition for retail deposits.

Changing mortgage terms and offers may encourage more Aussies to compare home loans in search of better deals. Last week, it was confirmed that the Australian Securities and Investments Commission has been granted new powers to crack down on excessive home loan exit fees.

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