The Finance Brokers Association of Australia (FBAA) has called on the Federal Government and regulators to take decisive action – including cracking down on secretive bank practices – to ease the enormous financial and mental health pressures Australians are under following 11 interest rate rises in 12 months.

In a letter earlier this month to the treasurer and minister for financial services, FBAA managing director Peter White AM wrote, “we believe that the number and size of these rate rises over such a short timeframe could result in even worse economic and social outcomes than the problem the RBA was attempting to address.”

The association’s recently commissioned ‘2023 Australian mortgage and rental affordability survey’ found that a large percentage of Australians with a mortgage and who are renting are being forced to make major financial sacrifices, sell assets, take on additional work, and move to cheaper properties, while a growing number are seeking mental health assistance as a direct result of interest rate stress.

“All of us – the community, lenders and government – must work together to address this financial and mental health emergency, but the banks can’t be trusted to do this without government pressure.”

The FBAA has called for the following:

1. The RBA to pause interest rate rises for a minimum of three to four months until the true impact can be evaluated.

2. The Government to force banks to transparently disclose the introductory / new borrower rate, as well as the current existing (back-book) borrower rate.

3. An immediate government inquiry into bank practices around the issue of disclosure, to protect borrowers and vulnerable markets.

4. The Australian Prudential Regulation Authority to reassess its decision to continue with a 3 per cent loan serviceability buffer for mortgages, and to reduce this to a rate of 1.5 to 2 per cent which is more appropriate in today’s economic environment.

Mr White said too many vulnerable borrowers are being lured by banks into what they believe is a better interest rate deal, only to find that their rate and payments increase once they are deemed an ‘existing’ borrower.

“It is vital that new borrowers see this difference – which can be around 0.5 per cent – so they are financing or refinancing with full awareness.

“The Hayne Royal Commission placed a significant emphasis on banks being transparent, and banks should be forced to disclose both rates in all advertising, promotions and communications to their new and existing borrowers,” he said.

Mr White said he welcomed the decision by some banks to move away from cashback offers to new borrowers, but it was not enough.