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Westpac CEO rejects ‘loyalty tax’ link to ‘fees for no service’

Chief executive of Westpac Brian Hartzer has dismissed suggestions that the disparity between back book and front book mortgage pricing is comparable to the “fees for no service” scandal.

Appearing before the House of Representatives standing committee on economics on Friday (8 November), Westpac CEO Brian Hartzer denied that the bank was applying a 'loyalty tax' by charging higher interest rates to existing borrowers.

Deputy chair of the committee and Labor MP Andrew Leigh went further, drawing a link between the disparity in front and back book mortgage pricing with the charging of “fees for no service” to wealth customers, as brought to light by the banking royal commission.

“Given that you have paid over $1 billion on fees for no service, it surprises me that you don’t see a fees for no service issue arising with these loyalty taxes,” Mr Leigh said.

However, Mr Hartzer denied that the two were comparable, noting the nuances involved in determining mortgage rates. 


“I think the issues are quite different,” he said.

“As we talked about on the financial planning side, we had an issue around record-keeping that related to a service and a business that we’ve now exited. 

“The pricing dynamics in the mortgage market are complex; there are a lot of things that go into managing a bank balance sheet and we have to be mindful of all of our funding costs, including for depositors, and our wholesale borrowing costs.”

Mr Hartzer reiterated that lower rates offered to new borrowers played an important role in fostering competition in the mortgage market.

“We want to continue to be very competitive for new business,” he added.


The Westpac CEO also denied that the bank has made it difficult for existing borrowers to switch to a lower rate and added that the bank provides customers with a more holistic service, beyond interest rates.

“We don’t make it difficult for people to switch, we make it very easy for people to ring up if they want to discuss their arrangements,” Mr Hartzer said.

“I think it’s important to recognise the value that people get from a relationship with Westpac. Its more than just the price they pay on a single product. 

“I think customers are making a choice about the relative value versus the relative price that theyre paying.”

Scrutiny over the pricing behaviour of the big banks recently intensified following their failure to pass on the RBA’s full 25 basis point cuts to the cash rate.

This triggered Treasurer Josh Frydenberg to commission the Australian Competition and Consumer Commission (ACCC) to conduct a Home Loan Price Inquiry. The inquiry will review pricing behaviour from 1 January 2019 to examine:

  • the differences between advertised rates and the prices actually charged or paid;
  • the differences between rates paid by existing customers and those paid by new customers (front and back book pricing behaviour);
  • pricing decisions in response to changes to the official cash rate; and
  • factors preventing customers from switching to cheaper home loans.

In exploring these matters, the ACCC will consider consumer decision-making and biases, information used by consumers and the extent to which lenders may contribute to consumers paying more than they need to for home loans.

[Related: Mortgage competition ‘alive and well’: insist big bank CEOs]

Westpac CEO rejects ‘loyalty tax’ link to ‘fees for no service’
Westpac CEO Brian Hartzer

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Charbel Kadib

Charbel Kadib is the news editor on the mortgages titles at Momentum Media.

Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.

You can email Charbel on: This email address is being protected from spambots. You need JavaScript enabled to view it.

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