ACCC slams ‘opaque’ banks over loans

THE consumer watchdog has slammed the lack of competition between big bank mortgages and the inability for consumers to make true comparisons.

THE consumer watchdog has lashed out at the lack of ­competition in the mortgage market and says big banks ­appear to be muddying the ­waters so consumers can’t compare loans.

In a new report, the Australian Competition and Consumer Commission raises concerns about potential collusion and says the market is marred by “opaque pricing”.

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“We do not often see the big four banks vying to offer borrowers the lowest interest rates,” ACCC chairman Rod Sims said on Thursday.

“Their pricing behaviour seems more accommodating and consistent with maintaining current (market) positions.

“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 ACCC is examining home loan pricing at the big four banks — the Commonwealth Bank, Westpac, ANZ and National Australia Bank — and Macquarie.

Its interim report, released on Thursday, says competition between the banks is weak.

The watchdog says the ­actions by the major lenders appear “more consistent with accommodating a shared ­interest in avoiding disruption of mutually beneficial pricing outcomes”, than competing for market share by offering lower interest rates.

“The big four banks focus largely on each other when they determine headline ­interest rates and discounts on variable rate residential mortgages,” the report says.

They “generally have not sought to compete” by offering low headline interest rates.

Australian Competition and Consumer Commission chairman Rod Sims. Picture: AAP

The CBA and Westpac have long held about 25 per cent of the mortgage market each, while ANZ and NAB have 15 per cent each.

Mr Sims also raised the issue of obscure discounting by the big banks, where they offered discounts — some advertised and some “discretionary” — to different groups of people in different circumstances.

Such discounting “lacks transparency”, he said, and meant it was “almost impossible” for customers to make ­accurate comparisons.

Pricing structures and product marketing were also unclear with the typical no-frills loan often more expensive than standard variable loans within the same bank.

“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,” Mr Sims said.

Established customers also paid an average of 0.32 percentage points more than new customers.

“It seems existing customers are not being rewarded for their loyalty — in fact they are worse off,” Mr Sims said.

The ACCC report says banks make it difficult for ­customers to compare loan products.

They often require would-be borrowers to make a full ­application before confirming a final interest rate, or require customers to produce a formal written offer from a rival bank before matching it or offering a better rate.

These practices and the lack of transparency also encouraged consumers to turn to mortgage brokers in the hope of better analysing the different products.

However, this was often an expensive and potentially misleading option, the commission says.

It cites an Australian ­Securities and Investments Commission report that found a large ­proportion of brokers were ­affiliated with banks, and that the big banks received a “disproportionately high share of referrals”.

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