Neobank 86 400 warns RBA scheme driving big four's cheap fixed rates

Neobank 86 400 has made an unsuccessful plea to the Reserve Bank for small banks to be granted more favourable access to a $90 billion emergency funding scheme, claiming the policy is helping the big four gain a “stranglehold” on new business via cheap home loans.

As fintech businesses such as Zip Co also lobby for access to government support, 86 400 has told a Senate inquiry that the design of a RBA funding program, introduced in response to COVID-19, “disproportionately” favours the big four.

Under the “term funding facility” (TFF) introduced last month, the RBA will provide banks with up to $90 billion in funding at an interest rate of just 0.25 per cent.

The terms are the same for each bank, irrespective of their size. Banks can access funding equal to 3 per cent of their loan book, and more funding on top of this if the banks increase their lending to businesses. 86 400, which does not lend to businesses, said that since it had only recently begun mortgage lending, its 3 per cent entitlement was “far too small to make any difference.”

Since the scheme was announced, major banks have led a sharp drop in fixed interest rates, which mortgage brokers last week said had contributed to the big four gaining market share.

86 400 chief executive Robert Bell said while he supported the scheme it was allowing the big four to “directly target retail borrowers with government subsidised rates that new entrants are simply unable to match.”

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Source: Neobank 86 400 warns RBA scheme driving big four’s cheap fixed rates