Sunrise presenter David Koch has criticized Australian banks for enjoying billions in profits while households suffer from the relentless rise in mortgage rates.
Interest rates rose to 3.35 percent last week, despite Reserve Bank Governor Phillip Lowe’s forecast that rates would not rise until 2024.
Dr. Lowe was forced to defend consecutive rate hikes during a Senate estimates hearing in the federal parliament on Wednesday and confirmed further hikes would follow.
Shortly before the hearing, the Commonwealth Bank revealed that its statutory net profit had increased when comparing the first fiscal halves of 2023 and 2022.
Struggling homeowners were outraged to learn that the big bank had fattened its pockets by 10 percent to $5.216 billion as thousands face losing their homes.
The host of Sunrise said it was a “bitter pill to swallow” for borrowers after the Commonwealth Bank reported record profits of $5 billion in just six months.
“Shareholders are happy, dividends are going up, but when you’re a customer you think what’s going on here, I’m struggling and they’re making a motza,” he said.
Sunrise presenter David Koch said on Thursday it was a ‘bitter pill to swallow’ for borrowers after the Commonwealth Bank reported a record $5 billion profit in just six months
Economist Christian Baylis told the Sunrise host that Australia’s largest banks have some of the highest profit margins in the world compared to the US and UK.
“They make really serious, serious profits. The way they do that is by giving depositors less and mortgage holders paying more and that’s the merry-go-round of bank profits,” he said.
Mr Baylis said borrowers can expect a ‘major mortgage lender’ within a few months as low fixed rate deals expire.
“Banks will rely more on risk pricing and those losses and defaults will come through,” the economist said.
“There’s going to be some more pain for the mortgagee.”
It comes just hours after the Sunrise host called on the government to guarantee every home loan taken out on the Reserve Bank’s erroneous advice.
Koch said many who invested in Mr Lowe’s erroneous forecast could lose their homes after nine rapid rate hikes in a matter of months.
Dr. Lowe (pictured) was forced on Wednesday to defend consecutive rate hikes against Senate estimates in the federal parliament and confirmed more hikes would follow
“All these Australian households, imagine the emotional strain you would be under right now, faced with the prospect of selling your home,” he said.
“It would destroy families and destroy relationships. That’s the human side of it.’
He suggested that the Albanian government go to the banks and say ‘we will guarantee the loans of these people because they have followed the negligent advice of the Reserve Bank’.
“They have yet to pay off their loans, but many of them have negative equity and the bank is about to sell them out,” he continued.
Negative equity occurs when a property is valued lower than the loan taken out to purchase it.
Last week, the Reserve Bank raised interest rates to 3.35 percent.
For those coming off fixed-rate deals, this could mean a jump from paying 2 percent of their loan to more than 5 percent.
Last week the Reserve Bank raised interest rates to 3.35 percent (pictured Dr Lowe attends a Senate estimate at Parliament House on Wednesday)
This means an additional $1,114 for a borrower with an average $600,000 mortgage who moves from an ultra-low 2 percent fixed rate to a new 5.26 percent variable rate mortgage.
The Reserve Bank has announced more rate hikes to combat inflation, which grew at an annual rate of 7.8 percent in the December quarter.
The federal government is concerned about the 800,000 fixed-rate mortgage holders who are not yet bearing the brunt of rising rates.
At Wednesday’s Senate hearing, Lowe stressed that more economic pain is needed to avoid a repeat of 1990, when RBA rates hit 17.5 percent.
“There is a risk that we haven’t done enough on interest rates yet and spending is more resilient and inflation remains high,” he said.
“If inflation remains high, it is very damaging to the economy, it exacerbates income inequality, it makes it harder for companies to make plans, it erodes the value of people’s savings, it undermines the economy.”