The Australian Greens have today launched a plan to require the big banks to offer a discount mortgage called HomeKeeper to all homeowners, including first homebuyers and owner-occupiers.
This would be delivered via legislating a cap on the profit a big bank can make on this mortgage product. The big banks could still offer other products and there would be no compulsion on anyone to switch to a HomeKeeper mortgage.
About HomeKeeper
- The Greens plan empowers the ACCC and APRA to together have the independent power to stop banks ripping people off, and ensure the big banks don’t unnecessarily overcharge
- HomeKeeper mortgages would be set at a regulated ceiling of no more than 1% above the cash rate. All of the big 5 banks would be required by regulations to offer HomeKeeper
- This discount HomeKeeper mortgage would be available to any owner-occupier whether or not they are a first home buyer
- People with a current mortgage on their home would be able to transfer into HomeKeeper at their own choice
- HomeKeeper would not be available for investment property mortgages, commercial premises or holiday homes
- Support would be provided to smaller banks so that they could offer a similar low-rate product without being financially disadvantaged
Overview: bank profits on mortgages
For decades the major banks have made enormous profits price-gouging on people’s mortgages, even when interest rates were low.
According to modelling by The Australia Institute, big bank profits on the average home loan sit around $9,130 in the first year and $200,880 over the lifetime of a 30-year loan.
The Australia Institute estimates that equates to $176 per week, or $761 a month of an average mortgage repayment is going directly to big bank profits.
With the HomeKeeper mortgage, the interest rate would be 1% above the RBA cash rate, the big banks would make a more reasonable profit and mortgage-holders would have more in their pockets for other expenses.
The current cash rate is 4.35%. The RBA lists the owner-occupier variable housing rates as 6.3% (new loans) and 6.4% (outstanding loans), giving a margin of 1.95% (new loans) and 2.05% (outstanding loans) above the cash rate.1
The latest average new mortgage size is $589,560,2 meaning for a new mortgage holder, a reduction in their interest rate from 6.3% to 5.35% would be equivalent to almost four interest rate cuts by the RBA, with a saving of up to $357 per month, or up to $4,284 per year. For someone with an $800,000 mortgage, the cut of almost a percentage point would be equivalent to monthly savings of up to $484 and annual savings of up to $5,814.
Rates of mortgage stress
Almost 1.5 million Australians are currently at risk of mortgage stress. The number of Australians ‘At Risk’ of mortgage stress has increased by 680,000 since May 2022 when the RBA began a cycle of interest rate increases. Official interest rates are now at 4.35%, the
highest interest rates have been since December 2011, over a decade ago.
Comment attributable to Greens spokesperson for Treasury Senator Nick McKim
“For too long, big banks have been ripping people off by charging interest rates well above the cash rate.
“The Big Four Banks are crushing mortgage holders. They are currently making billions of dollars in profits ripping off struggling mortgage holders by overcharging them on their mortgage.
”For the average home loan, $761 per month is pure profit for the major banks.
“To stop the price gouging and profiteering, the Australian Greens can today announce our new policy HomeKeeper: a discount mortgage for homeowners.
“This policy will reduce the costs of mortgages for everyone by limiting the amount at which banks can rip people off.
“No one should have to pay more than 1% over the current cash rate, it’s immoral that people are being forced out of their homes while banks are making billions in profits.
“This policy will stop big banks charging more than is absolutely necessary to provide a mortgage product to people struggling to keep a roof over their heads, and it will stop the Big Banks’ super-profits made from mortgages.
“After the next election we’ll almost certainly have a minority parliament and this is part of the Greens plan to work with Labor to help renters and people with mortgages.
“If you want change, you have to vote for it, and the first step is to vote for someone who is fighting for you.”
- 1 Reserve Bank of Australia, Lenders’ Interest Rates.
- 2 Australian Bureau of Statistics, Lending Indicators, September 2024.