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Broker slams ‘misleading’ rate discounts

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Huntley Mitchell 5 minute read

A Perth-based broker has called for ASIC to increase its regulation of pricing across lenders’ home loan products to stop borrowers being misled.

Speaking to The Adviser, Simplify Your Mortgage managing director Nathan Daniell questioned why lenders advertise a percentage discount off their standard variable rate (SVR), and feels sorry for those customers who have been “suckered in” by this tactic.

“When a lender details a percentage discount off their SVR, I find this extremely misleading for the consumer because for them to compare apples with apples, they have to understand how each lender arrives at their SVR – each lender has a different SVR – and then compare the features of each product,” he said.

“Worse still, every lender who does detail their SVR, at a pretty good educated guess, has never sold a standard variable rate product because it would be that far overpriced [that] no consumer would choose to go for that product.


“So, if you never sell a SVR home or investment loan, how can you advertise a discount? A discount off what? An imaginary product, or at the least a product that is never sold to the public?”

Mr Daniell said advertising these “misleading” rate discounts has always been an industry-wide practice among the lenders, and that ASIC needs to introduce new rules around this.

“Mortgage brokers’ incomes are capped by law with a maximum percentage of the loan amount, so why can’t ASIC set a maximum SVR per product category that the lenders, if they choose to discount, must use as the industry SVR?” he said.

“Until ASIC step in and set the maximum SVR, every lender will continue to advertise misleading information to try and attract consumers’ attention to their brand.”

However, Mr Daniell said an increasing number of borrowers are turning to brokers due to their confusion over just how much of a discount they are receiving from special offers.


“We understand one lender’s 0.30 per cent discount is a better priced product than another lender’s discount of 1.60 per cent,” he said.

“The reason why I am in business is because the majority of lenders who engage in misleading and confusing practices means I attract clients.”

RateCity spokesperson Sally Tindall said the group regularly sees “exciting” new rates come on to the market, but on closer inspection, discovers that they are only for new customers only.

“Special introductory offers and new low-rate products are designed as a marketing tool to attract new customers – not retain existing ones,” she said.

“These double standards can feel like a slap in the face for loyal customers, but that doesn’t mean you have to just cop it.”

[Related: Headline rates a ‘baiting and switching’ tactic, says broker]

Broker slams ‘misleading’ rate discounts
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