December 11, 2018 / 1:04 AM / 4 months ago

UPDATE 1-Australian regulator says banks used regulatory change to boost revenue

(Recasts with banks used regulatory push to boost revenue)

By Paulina Duran

SYDNEY, Dec 11 (Reuters) - Australia’s Big Four banks generated over A$1.1 billion ($792 million) in revenue by lifting rates on interest-only mortgages in unison in response to a regulatory change, the country’s competition watchdog said on Tuesday.

The Australian Competition and Consumer Commission accused the major lenders of “accommodative pricing behaviour” when they raised rates on all interest-only mortgages in response to a government cap on new interest-only mortgages in 2017.

The cap was designed to cool overheating house prices but instead the banks which dominate 80 percent of Australia’s mortgage market - Commonwealth Bank of Australia, Westpac Banking Corp, Australia and New Zealand Banking Group and National Australia Bank - used it as an excuse to charge all interest-only borrowers more, the ACCC said.

“Despite the interest-only benchmark applying only to new interest-only residential mortgages, the (banks) all followed ANZ’s decision to increase interest rates for both new and existing interest-only residential mortgages,” the report said.

It added that while the lenders had denied they were gouging money from customers, the rate rise was a “further illustration of accommodative pricing behaviour”.

Representatives for Westpac, ANZ and NAB were not immediately available for comment. A CBA spokeswoman said the bank was committed to a competitive mortgage market.

The regulator also found that the banks on average charged new customers interest rates up to 32 basis points lower than for existing customers. High search costs dissuaded borrowers from seeking a better mortgage rate, it added.

“Pricing for mortgages is opaque and the big four banks have a lot of discretion. The banks profit from this and it is against their interests to make pricing transparent,” ACCC Chair Rod Sims said in a statement.

The report is a further blow to Australia’s biggest lenders following years of scandal culminating in a public inquiry which exposed widespread wrongdoing in Australia’s financial industry.

$1 = 1.3893 Australian dollars Reporting by Paulina Duran in Sydney and Aby Jose Koilparambil in Bengaluru; Editing by Alexander Smith and Stephen Coates

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