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Appearing before the select committee on intergenerational housing inequity on Thursday (3 September), the Customer Owned Banking Association (COBA) highlighted the sector’s contribution to facilitating home ownership.
COBA senior manager policy Robert Thomas told the inquiry that while increasing housing supply remained critical, a diverse banking sector was also important to ensure Australians had access to different lenders, products, and sources of finance.
“A competitive and diverse banking sector is essential to ensure everyday Australians have fair access to finance and genuine consumer choice. We are proud of the role we play in that ecosystem, and we welcome the opportunity to discuss how we can do even more,” Thomas said.
Involvement in initiatives
Thomas added that Australia’s 47 mutual banks and credit unions, which serve more than 5.4 million Australians, were founded to address financial exclusion and continue to focus on practical solutions.
“Housing inequity is not a new phenomenon; in many ways, inequity is the very reason our sector was formed,” Thomas said.
“When traditional institutions refused to lend to working-class Australians or single women, everyday people pooled their money to help one another buy homes. Today, 95 per cent of our lending is for home loans, with 80 per cent supporting owner-occupiers.”
Thomas appeared alongside Bank First CEO Michelle Bagnall and Bank of us CEO Paul Ranson, who outlined how mutual banks are tailoring their lending to the needs of essential workers and regional communities.
In Victoria, Bank First is working with co-operative housing models to develop housing options for essential workers, including nurses and teachers, in the communities where they work.
“Bank First’s core focus is on ensuring our members can access the right housing for them, in locations that are close to their work and community. As a member-owned bank, we offer a range of options and leverage all available policies and initiatives so we can support our members into housing faster,” Bagnall said.
Similarly in Tasmania, Bank of us is the sole lending partner for the Tasmanian government’s MyHome shared equity program, which has helped 3,000 Tasmanians into homes with deposits as low as 2 per cent since 2022.
The inquiry also heard about other initiatives across the mutual banking sector, including Bank Australia’s provision of more than $450 million in finance to community housing providers and $260 million to specialist disability accommodation.
Police Bank has also partnered on the HOPE Housing shared equity program for frontline workers.
Are majors the problem or the solution?
Representatives from the major banks were also grilled by Greens senator Barbara Pocock over their role in Australia’s housing market.
The committee heard the big four banks made more than $30 billion in net profit in the last financial year – CBA, $11 billion; Westpac, $6.9 billion; NAB, $6.76 billion; and ANZ, $5.9 billion.
Pocock also said the banks made around $229,000 in profit over the life of an average 30-year owner-occupier mortgage.
She pressed Westpac chief economist Luci Ellis, Commonwealth Bank of Australia (CBA) executive general manager Robert Parker and head of economics Belinda Allen for a breakdown of the banks’ profit margins on their owner-occupier mortgage books, but none could provide an answer.
“This is a fair question,” Pocock said to CBA’s Parker on the matter.
“Your bank made $11 billion last year. Its profits increased by 7 per cent last year in the midst of a housing crisis. Its return on equity – correct me if I’m wrong – was 14 per cent in the last financial year.
“These are very large earnings by one of Australia’s largest companies. It’s certainly one of the most profitable banks on the planet if we are to believe the international commentary about the highly profitable nature of Australian banks.
“What is the responsibility of the Commonwealth Bank, a very profitable bank, to meet the crisis and assist owner-occupiers?”
They responded: “CBA doesn’t report its profit broken down by individual customer segments, such as owner-occupier or first home owners,” Parker said, with Ellis responding similarly.
Parker said he would provide “answers as possible, and take things on notice that require clarification”.
On CBA’s role in addressing housing affordability, Parker pointed to the bank’s participation in government-backed home ownership schemes.
“We participate in a range of schemes, for example, the First Home Buyers Scheme. We participate very actively in that scheme. First home buyers represent about 10 per cent of lending,” Parker said.
“These are Australians who are moving largely from rental into their first home, which we think is obviously a very positive development. So, in the last period of March and July of this year, we’ve lent around 8.1 billion to first home loans via the government’s guarantee scheme, and you know we have about 14,000 customers on that scheme.”
Allen said that while the banking sector was a key to remedying the issues, the ultimate cause of Australia’s housing woes lay with broader economic issues.
“Australia’s broader economic challenge remains productivity growth. Over time, productivity is what supports higher wages, stronger living standards, greater business investment, and the capacity to fund essential services. Improving housing supply, increasing construction capacity and supporting more productive economic growth are all important parts of that story,” Allen said.
Members of the broking industry also gave evidence to the eighth and final hearing of the senate inquiry, with the MFAA and FBAA both outlining that improvements could be made to mortgage lending to better support home buyers of all ages.
[Related: Banks battle for SME lending as margins hit 5-year low]
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