Lenders take opposing views on bank levy

Lenders take opposing views on bank levy

The Major Bank Levy has been passed in Australia’s Lower House today, following a recent Senate committee hearing and inquiry that saw a variety of banks, financial institutions and economic commentators have their say.

The levy is set to raise over $6 billion from Australia’s leading banks, which could have a knock-on effect on on home loan interest rates, fees, and other banking charges. 

For the Levy
Against the Levy
  • The Big Four (Westpac, ANZ, NAB and CBA)
  • Macquarie Bank
  • Australian Bankers Association
  • SIFSA
  • Finance Sector Union
  • Business Council of Australia

 

For the levy

Several of the non-major banks and consumer-owned financial institutions came out in favour of the levy, supporting a levelling of the playing field with banks that are “too big to fail”, and encouraging competition.

BOQ supports the Levy as a step towards a more competitive banking system as it properly recognises the major banks’ too-big-to-fail funding advantage that they enjoy.”

Suncorp said that while it does not generally support new or increased taxes on Australian businesses, it welcomes any initiative which helps to improve competitive neutrality in the banking sector.

While Bendigo and Adelaide Bank expressed its support of the levy, it also acknowledged its issues, and voiced its support of a considered approach to its legislation and implementation.

Against the levy

As expected, Australia’s Big Four banks came out swinging against the levy, proposing a number of amendments, including:

Introducing a sunset clause for the levy (e.g. when the budget returns to surplus)

  • Extending the levy to consistently cover foreign banks
  • Reviewing the legislation once a number of years have passed
  • Adding a mechanism to suspend the levy in the event of financial stress

In addition, among NAB’s objections to the levy were concerns of what impact it may have on Australia’s economy as a whole from an international perspective:

“Interest in the levy has been significant and largely negative in the context of it raising political risks associated with the operation of the Australian financial system and the general attractiveness of Australia as an investment destination.”

While ANZ opposed the levy, it acknowledged its commitment to rebuilding trust with the Parliament and the community, and accepted that the levy would pass into law.

The fifth bank set to be affect by the levy, Macquarie Bank, argued that it shouldn’t be counted as a “major bank”, due to domestic banking making up a small percentage of its wider investment and wholesale financial operations.

The Australian Bankers Association acknowledged its support for a strong and competitive banking industry, noting that several non-major banks supported the proposed levy in order to create a more level playing field.  

However, the ABA also described consultation for the bank levy as “rushed and inadequate”, expressing concern that the brunt of the levy’s costs would be borne by a combination of savers, borrowers, shareholders, employees and suppliers, and that imposing a levy on profitable institutions sets a worrying precedent for other successful Australian businesses.

The Business Council of Australia echoed these concerns:

“The levy is poor public policy, the problems of which have been compounded by poor process. Both the policy and the way it was introduced increase sovereign risk, undermine investor confidence and raise the question – which industry is next? The levy also represents another ‘one-off’ in a long line of ‘one-offs’ that undermine investor confidence.”

Other organisations voiced concerns regarding the levy’s potential impact on other aspects of the Australian economy. According to the Self-managed Independent Superannuation Funds Association, the bank levy will cause collateral damage to 27 million superannuation account holders whose funds invest heavily in bank shares, and a further one million with accounts in self-managed funds.

Having passed the House of Representatives, the Major Bank Levy is set to go to the Senate before the end of the week.

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An IMB Bank reverse mortgage allows you to borrow against your home equity. You can draw down the loan amount as a lump sum, regular income stream, line of credit or a combination. The interest can either be fixed or variable. To understand the current rates, you can check the lender’s website.

No repayments are required as long as you live in the home. If you sell it or move to a senior living facility, the loan must be repaid in full. In some cases, this can also happen after you have died. Generally, the interest rates for reverse mortgages are higher than regular mortgage loans.

The interest is added to the loan amount and it is compounded. It means you’ll pay interest on the interest you accrue. Therefore, the longer you have the loan, the higher is the interest and the amount you’ll have to repay.

What are the features of home loans for expats from Westpac?

If you’re an Australian citizen living and working abroad, you can borrow to buy a property in Australia. With a Westpac non-resident home loan, you can borrow up to 80 per cent of the property value to purchase a property whilst living overseas. The minimum loan amount for these loans is $25,000, with a maximum loan term of 30 years.

The interest rates and other fees for Westpac non-resident home loans are the same as regular home loans offered to borrowers living in Australia. You’ll have to submit proof of income, six-month bank statements, an employment letter, and your last two payslips. You may also be required to submit a copy of your passport and visa that shows you’re allowed to live and work abroad.

Why does Westpac charge an early termination fee for home loans?

The Westpac home loan early termination fee or break cost is applicable if you have a fixed rate home loan and repay part of or the whole outstanding amount before the fixed period ends. If you’re switching between products before the fixed period ends, you’ll pay a switching break cost and an administrative fee. 

The Westpac home loan early termination fee may not apply if you repay an amount below the prepayment threshold. The prepayment threshold is the amount Westpac allows you to repay during the fixed period outside your regular repayments.

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How to use the ME Bank reverse mortgage calculator?

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To take out a ME Bank reverse mortgage, you’ll need to provide information like your age, type of property – house or an apartment, postcode, and the estimated market value of the property. The loan to value ratio (LVR) is calculated based on your age and the property’s value.

When do mortgage payments start after settlement?

Generally speaking, your first mortgage payment falls due one month after the settlement date. However, this may vary based on your mortgage terms. You can check the exact date by contacting your lender.

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Once the settlement process is complete, the lender allows you to draw down the loan. The loan amount is debited from your loan account. As soon as the settlement paperwork is sorted, you can collect the keys to your new home and work your way through the moving-in checklist.

What do people do with a Macquarie Bank reverse?

There are a number of ways people use a Macquarie Bank reverse mortgage. Below are some reasons borrowers tend to release their home’s equity via a reverse mortgage:

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While there are no limitations on how you can use a Macquarie reverse mortgage loan, a reverse mortgage is not right for all borrowers. Reverse mortgages compound the interest, which means you end up paying interest on your interest. They can also affect your entitlement to things like the pension It’s important to think carefully, read up and speak with your family before you apply for a reverse mortgage.

How do I find out my current interest rate and how much is owing on my loan?

Your bank statements and/or your internet banking should show these details. If you are not sure, call your bank or estimate.

Do the big four banks have guarantor home loans?

Yes, ANZ, Commonwealth Bank, NAB and Westpac all offer guarantor home loans. These mortgages are also offered by many other banks, credit unions and building societies.

How do I apply for a home loan pre-approval from Commonwealth Bank?

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Preparing a financial summary, which lists all your income sources as well as significant expenses, can also help determine how much you can afford to borrow. You may also want to check your credit score before applying for pre-approval.

It’s worth remembering that a CBA home loan pre-approval doesn’t guarantee that you’ll get the loan. Once you get the pre-approval, you’ll have about three to six months to decide on a property and apply for the home loan. The bank will then confirm that the property is suitable for the loan before fully approving it.

Cash or mortgage – which is more suitable to buy an investment property?

Deciding whether to buy an investment property with cash or a mortgage is a matter or personal choice and will often depend on your financial situation. Using cash may seem logical if you have the money in reserve and it can allow you to later use the equity in your home. However, there may be other factors to think about, such as whether there are other debts to pay down and whether it will tie up all of your spare cash. Again, it’s a personal choice and may be worth seeking personal advice.

A mortgage is a popular option for people who don’t have enough cash in the bank to pay for an investment property. Sometimes when you take out a mortgage you can offset your loan interest against the rental income you may earn. The rental income can also help to pay down the loan.

How to apply for a pre-approval home loan from Bendigo Bank?

Applying for pre-approval on your home loan gives you confidence in your ability to secure finance while looking at potential new homes. You can get a free and personalised pre-approval home loan from Bendigo Bank in just a few minutes, without any credit checks or paperwork. 

Bendigo Bank offers pre-approval for home loans that allow you to understand the home loan size you may be able to get before looking for a new home. 

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To apply for a pre-approval on your home loan from Bendigo Bank, all you need to do is fill in a smart form. You could also contact the bank directly on 1300 236 344.

What is the difference between a fixed rate and variable rate?

A variable rate can fluctuate over the life of a loan as determined by your lender. While the rate is broadly reflective of market conditions, including the Reserve Bank’s cash rate, it is by no means the sole determining factor in your bank’s decision-making process.

A fixed rate is one which is set for a period of time, regardless of market fluctuations. Fixed rates can be as short as one year or as long as 15 years however after this time it will revert to a variable rate, unless you negotiate with your bank to enter into another fixed term agreement

Variable rates is that they are typically more flexible than their fixed rate counterparts which means that a lot of these products will let you make extra repayments and offer features such as offset accounts however fixed rates do offer customers a level of security by knowing exactly how much they need to set aside each month.

What is a variable home loan?

A variable rate home loan is one where the interest rate can and will change over the course of your loan. The rate is determined by your lender, not the Reserve Bank of Australia, so while the cash rate might go down, your bank may decide not to follow suit, although they do broadly follow market conditions. One of the upsides of variable rates is that they are typically more flexible than their fixed rate counterparts which means that a lot of these products will let you make extra repayments and offer features such as offset accounts.

What do mortgage brokers do?

Mortgage brokers are finance professionals who help borrowers organise home loans with lenders. As such, they act as middlemen between borrowers and lenders.

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