Treasurer Jim Chalmers says new bank reforms will help homeowners

Better rates on mortgages and savings accounts are coming under new reforms, Jim Chalmers says, and it will be easier for customers to switch loans.

Treasurer Jim Chalmers says ‘the changes announced will help bank customers get a better deal, including through more choice, lower prices and better services’. Picture: NewsWire / Damian Shaw

Banks will be forced to make it easier for customers to switch loans and notify them over interest rate changes under a raft of changes aimed at easing pressures on homeowners.

The reforms come as forecasts for interest rate cuts have been pushed into 2025, while inflation remains stickier than predicted.

Jim Chalmers on Friday announced a number of measures to ensure Australians would get better rates on their mortgages and savings accounts, declaring the changes would ensure customers “got a better deal” during the cost-of-living crisis.

“The government will help Australians find and switch to better mortgage deals and get better interest rates on their savings accounts,” he said.

Among the reforms, banks now will be required always to tell customers when their interest rate changes on their transaction or savings account and improve disclosure requirements for basic deposit products.

Banks will also need to make it easier to switch loans by ensuring their customers have “direct and easy access to the forms needed to exit a mortgage”.

And notifications over bonus interest rate offers and alerts telling customers when introductory lower interest rate periods end must be improved.

The reforms will impact not only banks but other platforms including comparison websites, which Labor says must “better disclose what determines how products are ranked and the financial relationships they have with recommended product providers”.

“The changes announced today will help bank customers get a better deal, including through more choice, lower prices and better services,” the Treasurer said.

“They will help create a more dynamic, diverse and resilient Australian banking sector, which is good for consumers, good for industry and good for the economy.”

The reforms come in response to two Australian Competition and Consumer Commission inquiries, one of which was conducted under the former government, and follow research showing the huge rise in cost of living over recent years has been most intense among middle-income and middle-aged households.

“These changes will make it easier for customers to find the best deals and switch to them,” Dr Chalmers said.

Figures from the Australian National University, released last month, revealed mortgaged households had suffered a 26 per cent surge in living costs over the past four years, compared to 18 per cent for renters.

On top of the reforms, Labor flagged the potential for new industry codes for the banking sector to ensure institutions were more transparent with customers.

And in a bid to create more competition in the sector, the government announced it would conduct a review into “the challenges faced by small and medium-sized banks”.

Led by the Council of Financial Regulators, in consultation with the ACCC, the review will focus on the role small and medium-sized banks play in providing competition, and the regulatory and market trends affecting them.

“(The review) will propose ways to improve regulation and ensure that oversight of these banks appropriately balances competition, innovation and stability,” Dr Chalmers said.

“The review will also assess how smaller banks source funding, including the role of covered bonds, and consider whether regulatory arrangements for new entrants can support additional competition in the sector.”

The efforts aimed at easing cost-of-living pressures by boosting competition in the banking industry follow the government launching a range of reviews into the supermarket sector, which has been accused in recent months of price gouging.