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Big 4 cashed in on mortgage rate ‘lag period’: ACCC

The major banks clawed in millions from a delay between mortgage rate cut announcements and effective dates, the ACCC has confirmed.

On Monday, the Australian Competition and Consumer Commission (ACCC) released its interim Home Loan Price Inquiry report, which examines the big four’s (ANZ, the Commonwealth Bank, NAB and Westpac) home loan pricing behaviour between 1 January 2019 and 31 October 2019.

The report was commissioned following criticism of the banks from Treasurer Josh Frydenberg for their failure to pass on the RBA’s full 25 basis point cuts to the cash rate in October 2019.

The ACCC has found that the big four banks “received additional revenue” from the “lag period” between interest rate cut announcements made following cash rate reductions and the effective date of such changes.


According to the competition watchdog, while each big four banks announced their rate changes on the day of, or the day after, the RBA’s cash rate decision, headline variable interest rate changes came into effect nine to 21 days after the announcements.

CBA was singled out by the ACCC, which claimed it had a “significantly longer lag period” than its big four peers following each of its headline variable rate changes in June, July and October 2019.

The Commonwealth Bank informed the ACCC that the additional home loan revenue it received from the lag period totalled approximately $37 million for each interest rate cut.

“This additional revenue, which appears to be relatively insignificant in the context of the bank’s overall home loan revenue, was one factor that contributed to the length of CBA’s lag period,” the ACCC stated.

Unlike its big four peers, CBA acknowledged that expected revenue gains formed part of its decision to set a commencement date for a mortgage rate reduction.

ANZ, NAB and Westpac denied that additional revenue from the lag period was part of their consideration, instead claiming that they needed “sufficient time to implement the required business and operational changes that follow a change in the headline variable rate”.

However, the ACCC has acknowledged that the increase in revenue may have been partly offset by higher costs incurred from interest paid to depositors during the lag period in instances where mortgage rate cuts and deposit rate changes come into effect at the same time.  

Moreover, the ACCC noted that the major banks had lag periods of up to 28 days for headline variable rate increases in 2018 in response to rising wholesale funding costs, which would have led to a “decrease in home loan revenue”.

The ACCC’s final report, which will examine the impediments to home loan switching and provide recommendations, was due to be released in September 2020.

However, in light of the coronavirus pandemic, the federal government has announced that it will postpone the release to 30 November 2020.

 [Related: ACCC provides CDR exemptions]

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