As read in MortgageBusiness online – “Opaque” pricing of discounts on home loan offerings has inhibited borrowers from making informed choices, according to a report from the Australian Competition and Consumer Commission.
After monitoring prices charged by the Commonwealth Bank, ANZ, NAB, Westpac and Macquarie Bank, the ACCC’s residential mortgage price inquiry has found “less than vigorous price competition”, particularly between the big four banks.
ACCC chairman Rod Sims accused the banks of maintaining a pricing structure that favours stability ahead of competition.
“We do not often see the big four banks vying to offer borrowers the lowest interest rates. Their pricing behaviour seems more accommodating and consistent with maintaining current positions,” Mr Sims said.
“We have seen various references to not wanting to ‘lead the market down’, to have rates that are ‘mid-ranked’ and to ‘maintain orderly market conduct’.”
The interim report found that in the two years leading to June 2017, the average discounts offered by the five banks under review were 78–139 basis points.
Mr Sims claimed that the banks’ discount offerings lacked transparency, making it difficult for customers to obtain accurate information.
“The discounting by the big banks lacks transparency and it’s almost impossible for customers to obtain accurate interest rate comparisons without investing a great deal of time and effort,” Mr Sims added. “But the potential savings from these discounts are immense.”
Further, the report found that the average interest rates paid for basic or “no frills” loans are often greater than for standard loans offered by the same lender.
“We think many customers who opted for ‘basic’ or ‘no frills’ loans thinking they are saving money would be surprised to learn they might actually be paying more.”
Other report findings include:
• Existing residential mortgage borrowers paid significantly higher interest rates than new borrowers at the same bank. Between 30 June 2015 and 30 June 2017, existing borrowers on standard variable interest rate residential mortgages at the big four banks were paying up to 32 basis points more (on average) than new borrowers.
• The large majority of borrowers are paying lower interest rates than the relevant headline interest rate.
• The bank with the lowest headline rate is not always the bank with the lowest average rate paid by borrowers.
More to come
John can be contacted on 0749722081 or 0410433919. Or email him at jwhitten@ihl.net.au or net www.ihl.net.au. John Whitten is a credit representative (CRN 399796) of BLASSA Pty Ltd (Australian Credit Licence No 391237).
