Economics committee chair Daniel Mulino
Banks may be encouraged to pilot 'tracker mortgages' if the government takes up a proposal from the House of Representatives Economics Committee.
The committee's report from its Inquiry into promoting economic dynamism, competition and business formation delves into a number of banking topics.
Tracker mortgages - where the variable rate would be adjusted to follow changes in the RBA cash rate - have been talked about on and off for years, but never really tried.
The committee argued in its report that "people with tracker mortgages are at less risk of paying an interest rate above the best available rate at the time, even if they do not pay attention to the market."
The committee also advocated for a Canadian-style scheme of ongoing public sector support for residential mortgage-backed securities.
This is another perennial of reform agendas for banking that never really goes anywhere.
The Canadian government invests in some RMBS bonds, "which reduces the costs of accessing funding for all banks butdisproportionately so for smaller banks" the report notes.
"Through this public securitisation of mortgages, Canada has a lower spread between bank deposit and lending rates."
Another suggested reform is that APRA provide an "independent benchmark (or series of benchmarks)for variable rates for new/switching customers over the preceding 12 months."
This benchmark would aid mortgage brokers andfinancial advisers" to improve their capacity to contact new clients toimprove churn rates."