ACCC Home Loan Price Inquiry tentatively welcomed

Building on the interim report released earlier this year, the final report (released on Saturday, 5 December) found that a lack of price transparency and higher interest rates for existing loans continued to persevere in the lending landscape and that the difficulty in changing loans were preventing borrowers from doing so.

As such, the ACCC has recommended four changes that could make mortgage pricing more transparent and reduce barriers to switching. These are:

• Requiring lenders to annually prompt borrowers to engage in the home loan market to see if they could benefit from switching lenders or home loan products;
• Requiring lenders to provide a standardised discharge authority form to borrowers to complete and allow for “appropriately authorised third parties” (for example, mortgage brokers) to complete and submit discharge forms on borrowers’ behalf;
• Suggesting that all lenders should be subject to a maximum time limit of 10 business days to complete the discharge process; and
• Recommending to government that the ACCC should “continue to inquire into and monitor competition and pricing in the home loan market”.

While government has said that it will “consider the report and respond in due course”, the heads of the broker associations have tentatively welcomed the report and its findings.

FBAA response

Speaking to The Adviser, the managing director of the Finance Brokers Association of Australia (FBAA), Peter White, commented: “We support the ACCC report findings to make banks more proactive with existing borrower interest rates. This ensures banks are more transparent as to what existing borrowers pay and what they are proposing for a lure to new borrowers.

“But we must remember that brokers are already doing annual reviews, and it should also be noted that brokers are held to a best interests duty while banks are not,” he said.

Mr White added that the FBAA has been publicly calling for standardised authorities, such as discharges.

“This is a very simple yet important evolution and ensures fluidity in the system together with [an] SLA time frame of 10 days.

“As we have said time and time again, there is no justification for these to be delayed any further,” he said.

“In terms of monitoring of competition and prices in the home loan sector, I feel this is something the ACCC should already be doing. Hopefully, this will bring greater transparency to the market,” the FBAA MD continued.

“It is also very pleasing to see the report acknowledge the ‘professional’ role brokers play. It infers brokers do all they can and that lenders now need to lift their game,” Mr White concluded.

MFAA response

Likewise, the CEO of the Mortgage & Finance Association of Australia (MFAA), Mike Felton, said that he particularly welcomed the moves around making discharges clearer and more swift.

He told The Adviser: “The MFAA consulted with the ACCC in their investigations and preparation of this report, and we are pleased to see that our concerns on discharges have been noted and that there are recommendations to make the process faster and easier with a greater degree of standardisation.

“Improvements to the discharge process coupled with proposed consumer credit reforms that will place greater emphasis on individual circumstances and borrower information should assist to further reduce impediments to refinancing, result in faster overall turnaround times and improve access to appropriately priced credit,” Mr Felton said.

He continued: “With an unrivalled best interests duty commencing on 1 January 2021, mortgage brokers will be uniquely placed to assist the remaining 40 per cent of consumers who are yet to use a broker in assessing whether their loans are appropriately priced and to help them navigate the refinancing process and any remaining challenges it may present.”

[Related: Lenders should prompt borrowers to review rate: ACCC final report]