Mortgage rates went up like a rocket, but will they come down like a feather?
The banks have been quick to increase mortgage rates. But when the RBA starts cutting, will they be as fast to do the same?
Professor Allan Fels is taking on big businesses over their pricing. In particular, he’s bothered by a lack of competition and the impacts this is having on what everyday Australians are paying.
This could soon be front of mind for both indebted households and those relying on the returns from cash in the bank. Because while mortgage holders and those with cash deposits are anxiously waiting for the Reserve Bank to start cutting the official cash rate, Fels’ new ACTU-commissioned price gouging report suggests they’d do well to keep a close eye on their own bank too.
“While most Australians view changes to the cash rate as the marker for home loan rate changes, in reality banks are able to avoid passing on the full cuts,” Fels, a former ACCC chair, says in the report.
Fels specifically warns about the asymmetric price transmission phenomenon, known more colloquially as “rockets and feathers”, where prices go up fast but take longer to drift back down. His report suggests this isn't uncommon for a range of goods and services like groceries and petrol but also interest rates on home loans.
