The Australian Competition and Consumer Commission has been directed to conduct an inquiry into the pricing policies of financial institutions providing residential mortgages.
The inquiry is to ensure the pricing practices of the institutions are better understood and made more transparent.
Chair of the ACCC, Rod Sims (pictured) said there would be a wide range of issues investigated including the rates paid by new versus existing customers, how the cost of financing for banks affected bank decisions on interest rates, and why the Reserve Bank of Australia’s rate cuts were not always passed on in full.
“In addition, the inquiry will consider what prevents more consumers from switching to cheaper home loans,” Mr Sims said.
“The ACCC will consider matters such as consumer decision-making and biases, information used by consumers and the extent to which suppliers may contribute to consumers paying more than they need to for home loans.”
He said the ACCC would be able to use compulsory powers to gather information from financial institutions including their decision-making documents.
“Having consumers and the community understand how pricing decisions are made, why, and with what consequences, is important for a well-functioning market,” Mr Sims said.
“We are looking forward to examining how banks make these crucial decisions. It will be important to understand and examine the different factors that financial institutions take into account when setting their prices.”
He said the ACCC would seek to provide answers to the questions that banking customers had long asked.
“For example, we know from our first financial services inquiry that there is an unusually large difference between the headline rate and the actual rates many customers are paying, which can be confusing for consumers,” Mr Sims said.
“It is also very difficult for customers to find out what mortgage rate they could pay with another financial institution, without going through a lengthy and time-consuming application process.”
He said the ACCC wanted to know what the barriers were that stood in customers’ ways, “particularly barriers created by the banks”.
The Commission is to deliver a preliminary report by 30 March 2020 and a final report by 30 September 2020.
