27 September 2023

ACCC’s bank review creates interest

Start the conversation

The Australian Competition and Consumer Commission (ACCC) has published an interim report from its Home Loan Price Inquiry showing that the big four banks placed recovering profits above passing on lower interest rates to mortgage customers.

Chair of the ACCC, Rod Sims said the banks — Westpac, ANZ, Commonwealth and NAB — were intent on shoring up their profitability during the recent period of low interest rates.

“It was their strong preference, after the Reserve Bank of Australia’s (RBA’s) cuts, not to further reduce the rates customers were earning on some deposit products as they approached zero per cent,” Mr Sims said.

“The banks’ reluctance to cut these deposit rates led them to anticipate lower profits, which they aimed to recover by not always fully passing through cash rate cuts to their mortgage customers.”

Mr Sims said the ACCC recognised that much had changed in the economic and funding environment since last year.

“The COVID-19 pandemic has shifted priorities and the banks are playing an important role in supporting the economy,” he said.

“However, the inquiry findings shed an important light on bank decision-making and raise questions about whether the banks could, at the time, have passed on a higher proportion of those RBA cash rate cuts to their mortgage customers.”

He said ACCC’s interim report also showed that although average interest rates charged by the big four banks on home loans fell during 2019, a lack of price transparency and higher interest rates for existing loans continued to be a cost to customers.

“The interim report examines home loan prices charged by the Big Four banks between 1 January and 31 October 2019. It found that home loan pricing practices continue to make it difficult for consumers to compare different mortgage products,” Mr Sims said.

“Headline rates did not accurately reflect the price most Big Four bank customers actually paid for their home loans because the overwhelming majority of customers received discounts, including opaque discretionary discounts,” he said.

The ACCC’s 84-page interim report can be accessed at this PS News link.

Start the conversation

Be among the first to get all the Public Sector and Defence news and views that matter.

Subscribe now and receive the latest news, delivered free to your inbox.

By submitting your email address you are agreeing to Region Group's terms and conditions and privacy policy.