Australia’s big four banks are making it almost impossible for customers to compare home loans and find the best deal, a new report shows.
The Australian Competition and Consumer Commission, in an interim report into the banks’ mortgage pricing decisions from 2015 to 2017, found they were using “opaque” discount rates that made it difficult for borrowers to effectively shop around.
ACCC chairman Rod Sims said a lack of transparency around discounts to standard variable rates, which ranged between 78 and 139 basis points, disadvantaged borrowers.
“It’s almost impossible for customers to obtain accurate interest rate comparisons without investing a great deal of time and effort,” Mr Sims told reporters in Sydney after the report’s release on Thursday.
Mr Sims said banks were not competing to offer borrowers the best price, with the watchdog uncovering evidence decision makers were trying to avoid “leading the market down”.
The watchdog also found banks favoured new borrowers over existing customers, and that many consumers could easily save money by switching lender.
“It seems existing customers are not being rewarded for their loyalty; in fact they are worse off,” Mr Sims said.
Treasurer Scott Morrison suggested the banks were making it confusing for customers and called for greater transparency to give more power to them.
“When you take your existing customers for granted, I think that is a sign that the customer isn’t getting the best deal,” Mr Morrison told reporters in Sydney on Thursday.
“You will get a better deal from your bank if you call them and if they don’t give you a better one, go to another one (bank).”
The treasurer said customers need to shop around, like they would with electricity prices or household appliances, to work out the best prices and best deals.
To increase competition in the banking industry he said the government had opened up the market to the customer-owned banking sector and introduced comprehensive credit reporting.
Customers were, however, spared relief from the federal government’s $6 billion bank levy, which the ACCC so far believes has not been passed on to customers.
Mr Morrison tasked the ACCC to monitor the big four retail banks and Macquarie Bank after the levy was imposed in last year’s federal budget.
The consumer watchdog says it will continue to monitor the impact of the levy, including any changes to mortgage rates.
The Australian Banking Association welcomed the interim report, saying it showed “very high levels of discounting” in the home loan market.
“It’s clear that competition is delivering better deals for customers, shopping around works and Australians should continue to do so to get the best discounts on the advertised rate,” a spokesman said in a statement.
The ACCC will issue its final report in June.