New home loans worth almost $80,000 to major banks.

Tuesday 26 February 2013

Article by Mozo

Australia's major banks are making more profit off of new home loans now than they have in over a decade, with new research showing that every new home loan is worth almost $80,000 in profit to providers.

Big bank profits made from home loans..

The huge lift in profits is largely due to major lenders witholding the full 1.75 percent interest rate cuts by the Reserve Bank. With recent news of the Big Four banks posting record profits, pressure is mounting for the banks to start passing rate cuts or face the government stepping in to regulate their massive earnings, reports The Australian.

"With a federal election due in mid September, we believe that pressure will likely build on the banks to begin reducing mortgage standard variable rates. If the banks do not follow suit, then the risk of political interference in the sector is large. This has already been seen in many other sectors of the economy which were perceived to be over-earning," said UBS analyst, Jonathan Mott.

Last week saw the launch of the Abacus website BalanceBanking.com.au, where the credit union and mutual banks industry representative is already pushing a petition for the government to adjust regulations that it claims favour the Big Four banks.

The banks make an annual profit around $2,640 on a $300,000 home loan, almost $80,000 over the life time of the loan. The high margin of profit on home loans has seen lenders scrambling to attract borrowers by offering a number of incentives such as reduced rates. The market is already seeing lows such as 4.89% on 3 year fixed interest rates and 5.09% on standard variable rates.

While the major banks may be witholding on interest rate cuts, the rates mentioned above show that a home loan comparison could find mortgage holders a far better interest rate from an alternative lender.

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