Consumer watchdog attacks big banks of lack of transparency on home loan rate deals
The nation’s biggest banks have come under fire for making it confusing for customers to compare home loan interest rate deals.
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The nation’s biggest banks have made it “extremely confusing” for mortgage customers to compare deals and it could lead to them paying much more, the nation’s top consumer watchdog has warned.
The Morrison Government today released the Australian Competition and Consumer Commission’s Home Loan Price Inquiry report and found customers were being misguided about the true rates they are paying on their deals.
The standard variable rate (SVR) – the headline interest rate used to compare loan offers – was found to be an inaccurate indicter or the true price customers pay.
ACCC chairman Rod Sims said “there’s not many products where the price is as unclear as mortgage interest rates”.
“Your mortgage is your biggest financial outlay and yet the price is so unclear, the standard variable rate is not really much of a guide at all,” he said.
“Ninety per cent of people are paying something with a deep discount off the standard variable rate but the problem is you don’t know what the discount is.”
The report also found loyalty does not pay off.
New owner occupier customers paid on average 26 basis points (0.26 percentage points) less than existing customers.
And for customers who held loans with the same bank for more than five years they were paying 0.4 percentage points more than the price on new loans.
Owner occupier mortgage customers could be paying rates anywhere from 2.09 per cent up to 5 per cent.
Mr Sims said the only way customers could work out what the SVR was involved “ringing up the bank and pressing them”.
“You have to press them and ask what is your best price,” he said.
“The price of mortgages is very unclear and it makes it difficult for consumers to compare rates.”
He also said the “more loyal you are the more you are paying”.
“I’m afraid the way the system works is you should be ringing up your bank every year or two and pressing for a lower rate, it’s worth serious money to do that,” Mr Sims said.
“It may be worth threatening to and actually changing banks.”
In a joint release issued by Treasurer Josh Frydenberg and Assistant Treasurer Michael Sukkar it found SVRs were a poor tool used to compare offers.
“In relation to SVRs offered by the major banks the ACCC found an overall lack of price transparency, particularly for new loans, making it difficult to compare home loans,” Frydenberg and Sukkar said.
The final report will examine the issue consumers face when switching lenders and provide recommendations on improving further competition in the mortgage market.
The Australian Banking Association’s chief executive officer Anna Bligh said customers looking for a better mortgage deal should first contact their bank to see if any reduction is available.
“Then shop around to ensure they get the best deal possible,” she said.
The final report is likely to be handed down in November.
Originally published as Consumer watchdog attacks big banks of lack of transparency on home loan rate deals