Banks on notice for applying high refinancing interest rates

Homeowners have put the major banks and lenders on notice after they found the refinancing offered to them based on exceptionally high interest rates.

The latest report obtained from Australian Bureau of Statistics on housing finance figures released on Friday indicated a rise of 3.5 percent in refinancing in November after the increase in mortgage rates facilitated by the major Australian banks and lenders in October. TD Securities chief Asia-Pacific Macro Strategist Annette Beacher stated that refinancing rate jumped to 15.6 percent over the year from 3.5 percent in November.

The end of November saw Australians owing $1.449 trillion on their assets, which was $11 billion more than October’s closing balance. Home lending has increased by 1.8 percent in November as indicated by the ABS report. However, Beacher added that the overall housing finance sector has been facing challenges since April 2014.

Beacher stated that the term from Oct. 14 and Oct. 23 saw major banks exploiting homeowners by applying higher interest rates on refinancing. “The share of fixed mortgages (locked in for two years or more) jumped from 9.1 percent to 11.4 percent in November, also not a coincidence,” News Corp quoted her as saying.

“Two years or longer is a more reliable sign of shifting consumer behaviour, and clearly households are locking in good deals as they think the easing cycle is over ... Overall, a decent report but shows that consumers did respond quickly to those out of cycle hikes.”

This is not the first time when major banks and lenders have been issued notice. In December, the Federal Reserve’s Board of Governors in association with Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency jointly issued a warning to banks for taking underwriting of loans for commercial real estate casually. The regulators said that they would keep a constant watch on loan standards to make sure financial health of the lenders is not affected.