No ‘viable market opportunity’ for tracker mortgages

A chief banking representative has suggested that there is currently “not a viable market opportunity” for rate tracker mortgages in Australia, despite “more than 85 per cent” of home buyers choosing variable rate home loans.

According to Steven Münchenberg from the Australian Bankers’ Association (ABA), the “very competitive market” of over 3,600 products and the “lowest interest rates in half a century” mean that customers can currently “choose the home loan product that best suits their financial needs”.

He added, however, that rate tracker mortgages — which are tied to the cash rate — were not a product currently offered by financial institutes in the country, suggesting that at this time, “there is not a viable market opportunity for this type of product”.

Mr Münchenberg continued: “Banks are, however, always looking at ways to improve their products and services. This involves reviewing product design and drawing on international experiences to see if customers would get any value from a new product."

The subject of rate tracker mortgages has been of note recently, after they were discussed during parliamentary hearings during the recent inquiry into the major banks.

The concept of linking mortgage rates to the cash rate was earlier suggested by the parliamentary standing committee in an effort to “protect customers from interest rate fluctuations that are not genuinely caused by changes to the bank’s cost of funds”.

Mr Münchenberg concluded that it was important for Australian home buyers searching for a home loan product to be aware of what features were most important to them by factoring application fees, repayment options as well as interest rates into their decisions.

[Related: Banking review pushes for tracker mortgages]

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Tamikah Bretzke

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