The Finance Brokers Association of Australia (FBAA) is sceptical about moves by the big banks to set aside hundreds of millions of dollars to enable them to offer big discounts in the property borrowing market.
As reported by the Australian Financial Review, the big four have allocated $600m between them to offer rates that haven’t been seen in more than 60 years.
At the same time, smaller lenders are being squeezed out and FBAA executive director Peter White said the first thing that comes to mind is the caveat emptor – buyer beware.
“Nothing comes for free and if it seems too good to be true it probably is,” he said.
“If what is being reported is the case, then this in essence enables the banks to buy business to increase their databases and profits.
“They will also cross-sell insurance and financial planning, plus a whole swag of other products.”
The big banks hope their near-record low interest rates will incentivise borrowers to invest in the property market in light of indicators that it is starting to cool off. This strategy is also about encouraging borrowers to swap lenders, so it’s not just about buying property.
Mr White said it is yet another example of those banks distancing themselves from the rest of the market indicators, while increasing their profits along the way.
“Once you’re on the hook, the big banks increase the margins on their existing loan books and make a huge profit to benefit their shareholders, their own jobs and pockets.
“Cheap introductory interest rates with lenders has been going on forever and this, if it is the case, is just a current variation of the theme.
“They aren’t giving away $600m as such without a pay day.”