5 December 2020

Release of ACCC Home Loan Price Inquiry final report

The Morrison Government has today released the Australian Competition and Consumer Commission’s (ACCC) Home Loan Price Inquiry final report.

In October 2019, the ACCC was directed to conduct an inquiry into home loan pricing to ensure the pricing practices of Australia’s financial institutions are better understood and made more transparent.

An interim report, released in April 2020, found that headline variable mortgage interest rates are not an accurate indicator of the interest rates customers actually pay due to discounts offered by banks. The interim report also found that new borrowers continue to pay less on average than existing borrowers.

The final report focuses on impediments to borrowers switching lenders or home loan products and finds that they face challenges at every stage, including:

  • a lack of borrower engagement to look for a better deal, despite there being significant gains from switching to a home loan with a lower interest rate;
  • a lack of easily accessible, transparent and straightforward pricing information, resulting in high search costs; and
  • unclear, uncertain, costly and lengthy discharge processes that in turn cause borrowers to give up looking for alternative products.

The ACCC found borrowers can save thousands of dollars in the first year alone by switching lenders or products or asking for a better deal, with older loans around 58 basis points higher than the average rate for new loans. This could translate to a saving of over $17,000 over the life of a $250,000 loan for a borrower who switches, or over $34,000 over the life of a $500,000 loan.

The findings also underscore the Government’s continued commitment to a number of major reforms to increase competition across the banking industry, including credit reforms that will remove unnecessary barriers to accessing credit and the implementation of the Consumer Data Right which will empower consumers to more easily compare and switch between home loan products and lenders.

The ACCC has made four recommendations aimed at encouraging borrowers to engage with the home loan market, to encourage switching and to make that process easier. The Government will consider the report and respond in due course.

The ACCC’s Home Loan Price Inquiry final report is available on the ACCC website.