Treasurer Josh Frydenberg has directed the Australian Competition and Consumer Commission (ACCC) to probe the pricing of residential mortgage products, including assessing what barriers may be preventing customers from switching lenders.
The move sets the stage for the further empowerment of small-to-medium non-bank lenders, which are currently seizing the economic and political climate to win customers from the major banks.
The ongoing back-and-forth between the federal government and Australia’s top bankers took several interesting turns on Monday morning, with news of the ACCC inquiry coming within hours of a House Economics Committee announcement that smaller banks (themselves massive companies) will also be subject to renewed scrutiny.
It comes about a week after Frydenberg rekindled tensions between bankers and the government in the wake of the Reserve Bank’s latest interest rate cut, lambasting the likes of Commonwealth Bank, Westpac, NAB and ANZ for not passing it on in full.
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Frydenberg and Prime Minister Scott Morrison have accused the big banks of profiteering in the wake of the cut, with the Treasurer advising Australians to “shop around” and even explicitly referencing non-bank lender Athena in media interviews.
On Monday, Frydenberg said the mortgage pricing inquiry will examine the prices charged by home loan lenders across the entire market, how the banks make pricing decisions, and also what barriers exist for those wanting to make the switch.
“The inquiry supports the Government’s commitment to promoting competition and good consumer outcomes in the residential mortgage market,” a statement on the Treasurer’s website, published Monday, reads.
To say the inquiry is bad timing for the major banks is an understatement. Following the damning revelations of the banking royal commission, emerging technologies are already blowing wind into the sails of new competitors at a time when public trust in the big four is shattered.
Beyond cheering this transition on in rhetoric, the $13.2 million provisioned to the ACCC on Monday to conduct this latest inquiry comes on the heels of the $2 billion business securitisation fund, which will direct government support into non-bank lenders in the SME finance space.
The ACCC said it will commence its inquiry immediately, noting on Monday it will be empowered to use compulsory information-gathering powers, which could force the major banks to pony up documents that further damage their credibility.
ACCC chair Rod Sims said transparency was important for a well-functioning market in a statement circulated Monday.
“We will aim to provide answers to the questions that banking customers have long asked,” Sims said.
“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.
“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.
“We have evidence that customers can save considerable money by switching providers, and we want to fully understand what the barriers are that stand in their way, particularly barriers created by the banks,” Sims said.