The ACCC released it’s 84 page interim report on the Home Loan Price Inquiry. The report which was released at the end of April, focusing on the decision-making behind the interest rates charged to consumers by the main suppliers of home loans in Australia – ANZ, CBA, NAB and Westpac.

The interim report focused on the findings of home loan pricing during the period of 1st January 2019 to 31st October 2019. They examined a range of documents and data on the prices paid by consumers. The report explains that the findings reinforce or built on the findings from their previous report.

A lack of price transparency makes it difficult for consumers to compare home loans

One of the ACCC’s key findings was that a lack of transparency around discount interest rates made it unnecessarily difficult and costly in the long run for consumers to find the best prices, although it added that borrowers could achieve significant savings by shopping around for discounted rates.

The report noted there was a significant difference between the headline interest rates the big four banks advertise compared to their advertised discounts and, perhaps even more so, their discretionary discount rates.

Discretionary discount rates may be much less well-known to consumers, given they are available to customers on a case-by-case basis, only where a customer explicitly asks the bank for a better rate.

Loyalty can cost existing customers

The report noted that whilst lenders attract new customers with increasingly large discounts over time has created a difference between the average interest rates paid for new loans compared to existing loans. As at 30 September 2019, customers with new owner−occupier loans with principal and interest repayments were paying, on average, 26 basis points less than customers with existing loans.

We encourage consumers to shop around when looking for a home loan and to negotiate with lenders

The report also found that banks only cut their headline rates after cuts to the cash rate and the cuts were also lower than the reduction in funding costs, they were also found to take their time ion implementing the reductions.

 we observed that the big four banks only cut their headline variable rates following the cash rate reductions in June, July and October 2019. This was despite a sustained decrease in their cost of funds over much of 2019

 in comparison, in mid-2018 to early 2019, each of the big four banks increased headline variable rates when there was no change in the cash rate.

The report will be completed and provided to the Treasurer by 30th September 2020 were it is also expected to present it’s findings on what impedes home loan customers from switching between lenders.

Quotes taken from the ACCC Home loan price inquiry issued 28th April 2020. Full report can be found: https://www.accc.gov.au/system/files/ACCC%20Home%20Loan%20Price%20Inquiry%20-%20Interim%20report%20-%2030%20March%202020.pdf