Sunrise host David Koch has slammed Australian banks for enjoying billion-dollar profits as households suffer under unrelenting mortgage rate rises.
Interest rates rose to 3.35 per cent last week despite Reserve Bank Governor Phillip Lowe forecasting rates would not rise until 2024.
Dr Lowe was forced to defend successive interest rate hikes at a Senate estimates hearing in Federal Parliament on Wednesday and confirmed more rises would follow.
Shortly before the hearing, the Commonwealth Bank revealed its statutory net profit had increased when comparing the first fiscal halves of 2023 and 2022.
Struggling homeowners were enraged to learn the major bank has fattened its pockets by 10 per cent to $5.216billion as thousands face losing their homes.
The Sunrise host said it was a ‘bitter pill to swallow’ for borrowers after the Commonwealth Bank reported a record $5billion profit in just six months’ time.
‘Shareholders are happy, dividends are going up, but if you are a customer you’re thinking what is going on here, I’m struggling and they’re making a motza,’ he said.
Sunrise host David Koch on Thursday said it was a ‘bitter pill to swallow’ for borrowers after the Commonwealth Bank reported a record $5billion profit in just six months
Economist Christian Baylis told the Sunrise host that Australia’s major banks enjoy some of the highest profit margins in the world when compared to the US and UK.
‘They really do make serious, serious profits. The way that they do that is by giving savers less and charging mortgage holders more and that is the merry-go-round of bank profits,’ he said.
Mr Baylis said borrowers could expect a ‘big mortgage lifter’ in just a few months’ time as low fixed rate deals start to expire.
‘Banks will start to charge more to price at risk and to price those losses and defaults come through as well,’ the economist said.
‘There’s a bit more pain to come for the mortgage holder.’
It comes just hours after the Sunrise host called on the government to guarantee every home loan that was taken out on the erroneous advice of the Reserve Bank.
Koch said many who invested in Mr Lowe’s erroneous forecast could lose their homes after nine rapid interest rate rises in a matter of months.
Dr Lowe (pictured) was forced to defend successive interest rate hikes at a Senate estimates in Federal Parliament on Wednesday and confirmed more rises would follow
‘All of these Australian households, imagine the emotional pressure you would be going under at the moment, facing the prospect of a sale on your house,’ he said.
‘It would be destroying families and destroying relationships. That’s the human side of it.’
He proposed the Albanese government should go to the banks and say ‘we will guarantee these people’s loans because they followed the derelict advice of the Reserve Bank’.
‘They’ve still got to paying their loans but many of them are in negative equity and the bank will be on the verge of selling them out,’ he continued.
Negative equity occurs when a property is valued at less than the loan taken out to purchase it.
Last week, the Reserve Bank increased interest rates to 3.35 per cent.
For those coming off fixed rate deals this could mean a jump from paying 2 per cent of their loan to over 5 per cent.
Last week, the Reserve Bank increased interest rates to 3.35 per cent (pictured, Dr Lowe attends a Senate Estimates at Parliament House on Wednesday)
This means an extra $1,114 for a borrower with an average $600,000 home loan who is coming off an ultra-low fixed rate of 2 per cent and moving on to a new 5.26 per cent variable rate mortgage.
The Reserve Bank has foreshadowed more interest rate rises to battle inflation, which grew by 7.8 per cent annually in the December quarter.
The federal government is concerned about the 800,000 mortgage holders on fixed rates yet to feel the full brunt of increasing rates.
At Wednesday’s Senate hearing, Mr Lowe insisted more economic pain is necessary to avoid a repeat of 1990 when RBA rates topped at 17.5 per cent.
‘There is a risk that we have not yet done enough with interest rates and spending is more resilient and that inflation stays high,’ he said.
‘If inflation stays high, it’s very damaging for the economy, it worsens income inequality, it makes it harder for businesses to plan, it erodes the value of people’s savings, it’s corrosive for the economy.’
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