People looking for a home loan from the big four banks cannot easily compare offers and many customers do not pay what advertised interest rates suggest.

Those are among the Australian Competition and Consumer Commission’s early findings from its inquiry into the banks’ home loan prices.

The consumer watchdog is investigating ways to make home loan pricing easier to understand after the federal government asked it to investigate.

The ACCC’s interim report says the standard variable rate advertised by banks is not a good indicator because close to 90 per cent of the banks’ customers received discounts.

Banks advertised discounted rates but also gave discretionary discounts to customers, the ACCC found.

These discounts were also often weighted towards new customers rather than existing ones.

The watchdog analysed home loan pricing from January to October last year for its findings.

The ACCC also examined banks’ interest rate responses to changes in the official cash rate.

Using cost of funds data provided by the banks, the regulator found these costs fell throughout the year.

However, the banks only reduced their variable rates when the Reserve Bank cut the cash rate.

While the ACCC acknowledged the cash rate was only one factor in the cost of funds, it says the banks only cut interest rates when there was public pressure to do so.

Its final report, due in November, will recommend ways to improve competition.