John Kolenda warns on phantom mortgage home loan rates

Home loan consumers should be cautious of “phantom rates”, the head of major mortgage group 1300HomeLoan, John Kolenda has warned.

He has questioned the sustainability of some rate offers as lenders have been unfairly baiting consumers with “aggressively priced” mortgage products which turn out not to be true. 

“Some lenders are aggressively pricing products to lure customers and boost their market share and then when they are signed up they increase their mortgage rates independently of any interest rate decisions by the Reserve Bank of Australia (RBA),” Kolenda said.

Kolenda says lenders are blaming cost of funding issues and changes to regulations for non-delivery. 

“We also had the out of cycle raises on home loan rates in response to rising funding costs and the additional costs coming in for the additional compliance and regulatory increase on reserves that the banks will have to have in place by end of June this year.

“But the bank wholesale funding costs did not rise enough to warrant the types of rate increases they imposed.

“I think there was an element of a profit grab done under the umbrella of higher regulatory and funding costs at the time when those decisions were made.”

Kolenda pointed to the bond market where NAB recently estimated rates over the bank bill swap rate (BBSW) had increased by at least 30 basis points.

“This again raises serious concerns as to how lenders will react when it comes to their existing customers, especially when lenders are offering rates as low as 3.69 per cent for new business,” he said.

“We question the sustainability of that rate offer with the back drop of current market conditions.”