The big banks’ refusal to pass on the cash-rate cut by the Reserve Bank of Australia (RBA) in full has triggered the federal government to order the Australian Competition and Consumer Commission (ACCC) an inquiry on mortgage pricing.
Treasurer Josh Frydenberg ordered the ACCC to conduct a probe that will tackle the big banks’ pricing practices.
He said he was trying the get the inside scoop on the operation of these bank operations and gave the ACCC power to conduct the inquiry. It also has the specific power to request important information from banks.
ACCC will examine a range of issues, including the rates charged to new customers and those who are customers already, how bank financing costs have influenced bank rate decisions, as well as why RBA cuts don’t always get fully passed on. This inquiry will also investigate why home loan rates aren’t lower for consumers.
The commission can use compulsory information-gathering powers to gather information from financial institutions, including their decision-making documents.
A functioning market will require consumers to be able to understand pricing decisions made in financial institutions’ favor, their effects, and why. Rod Sims, the chairperson of ACCC stated that it is crucial to understand and examine all factors that financial institutions consider when setting prices.
ACCC will closely collaborate with regulators, including the RBA (Reserve Bank of Australia) and the Australian Prudential Regulatory Authority (APRA). The commission is expected to release a preliminary report by March 2020. The final report is due by 30 September 2020.
Anna Bligh (CEO Australian Banking Association), stated that the inquiry would shed some light on the actual costs of home-loan borrowing in Australia.
“There are often differences in the advertised rate and the rate customers negotiate to their bank. She stated that not all customers pay exactly the same rate.
Loyal customers get higher rates
Sims stated that banks seem to disregard loyal customers and charge them higher interest rates. Sims stated that he would investigate the practices of major banks.
Is that what banks want? They love to rip-off their loyal customers. Sims told The Australian Financial Review that it is the treasurer who will decide what inquires will be made and when.
A recent ABA survey found that while most Australians are happy with their current financial institutions over the past year, 2.8 million customers switched to new financial institutions or banks for their home loans or credit cards.
Bligh said that customers are now more competitive than ever when it comes to getting a home loan or credit card. “The message to all Australians is if you aren’t satisfied with your home loan, credit card, or other product, it pays to shop around to get the best deal possible.”
Frydenberg also criticized the banks for not passing on the RBA’s full rate reductions and encouraged them to seek better deals in the market.