Much of what homeowners pay helps make Australian banks among the most profitable in the world
Australia’s major banks are profiting more than $200,000 from the typical home loan, according to new research by The Australia Institute.
The Commonwealth Bank, NAB, Westpac, and ANZ collectively posted pre-tax profits of $44.6 billion in the last financial year, with $17.6 billion coming specifically from loans to owner-occupiers. This segment accounted for 39.5% of their total profit, despite representing only 24.6% of their overall business.
The report found that the big four banks collect approximately $9,130 in profit during the first year of a typical owner-occupied home loan, which equates to around $761 per month or $176 per week. Over the life of a 30-year loan, this could total $200,880 in profit, or nearly 35% of the average mortgage, factoring in recent interest rate rises.
The Australia Institute said that while Australian households face financial pressure after 13 consecutive interest rate increases, a significant portion of their payments is funneled into bank profits rather than reinvested in services or staff.
Australia’s banks rank among the world’s most profitable, while Australian Bureau of Statistics data shows a decline in local banking jobs. Employment in the financial services sector dropped by more than 35,000 roles between November 2023 and August 2024, even as banks increased hiring abroad, particularly in India.
“This report highlights that a lack of competition among the big banks has come at the cost of homeowners,” said Greg Jericho (pictured above left), chief economist at The Australia Institute. “The big four are generating massive profits from home loans that far exceed the level of risk the banks undertake.”
Matt Grudnoff (pictured above right), senior economist at The Australia Institute, echoed these concerns, noting that recent interest rate hikes have disproportionately benefitted banks while straining households.
“The 13 interest rate rises have been great for banks and terrible for homeowners who are having to pay for inflation that was driven largely by corporations like banks increasing their profits,” he said.
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