Farmers copping high interest rates

A former banker has backed claims that some WA farmers are paying more than double standard interest rates as they battle to service huge debts.

Bill Foreman said banks were taking a harder line with farmers and adding big risk margins to advertised base interest rates of about 8 per cent for agribusiness overdrafts.

Mr Foreman, who held senior positions with Bankwest, Elders, Landmark, ANZ and CBH, said he worked with farmers paying 16 per cent in his current role as a private financial consultant.

"Banks are charging the cost of funds plus a margin based on risk and then, if the client is in default, they can charge a default rate as well, which is an additional 2.5 to 3 per cent," he said.

WAFarmers and the Muntadgin Farming Alliance have reported rates of 18 per cent. The National Farmers' Federation said it received more complaints about the issue from WA than any other part of Australia.

Australian Bankers' Association chief executive Steven Munchenberg said the high rates would only apply in exceptional circumstances.

"The only situation we can think of where a farmer might face interest rates in that order (14 to 18 per cent) would be notional interest rates where a farmer is in default," Mr Munchenberg. "The vast majority of farmers would not be paying anything like that interest rate."

Bank websites refer to a base rate for farm overdrafts plus a customer margin based on "individual circumstances".

WAFarmers is surveying its members to give it a clearer idea of interest rates and the regions subject to high premiums.

"It appears some farm enterprises are being affected by discriminatory lending practices where excessive risk premiums and disproportionately high rates are charged," WAFarmers president Dale Park said.

The NFF released agribusiness loan figures yesterday which showed three of the eight banks monitored - Bendigo, CommBank and Suncorp - had not passed on in full last month's Reserve Bank cut which saw interest rates reduced to a 53-year low of 2.5 per cent.

"In fact, no lender has passed on the full interest rate cuts from July 2012 to now - a full one per cent - in full. Even the best performing banks have only passed on .90 per cent of that," NFF president Duncan Fraser said.

Total farm debt in Australia is estimated at $63 billion, less than 10 per cent of total business debt.