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Big 4 unfazed by sharper pricing from non-majors

by Charbel Kadib11 minute read
big four banks

Lower home loan rates offered by smaller lenders had no bearing on the big four’s pricing decisions, the ACCC has found.

On Monday, the Australian Competition and Consumer Commission (ACCC) released its interim Home Loan Price Inquiry report, which examines the big four’s (ANZ, the Commonwealth Bank, NAB and Westpac) home loan pricing behaviour between 1 January 2019 and 31 October 2019.

The report was commissioned following criticism of the banks from Treasurer Josh Frydenberg for their failure to pass on the RBA’s full 25 basis point cuts to the cash rate in 2019.

Among the findings in the ACCC’s interim report is that the major banks were unfazed about being outpriced by their smaller competitors.


According to the competition watchdog, the big four did not consider matching interest rates offered by non-majors following cuts to the cash rate from the RBA, despite acknowledging that they were losing market share.

“At least three of the banks observed that other lenders were growing their mortgage portfolios significantly faster than the big four banks and were consequently taking market share from them,” the ACCC reported.

According to internal communications obtained by the ACCC, one unnamed major bank executive conceded that system growth was negative and that there were “sharp rates” on offer at second tier banks, but told staff that the bank should not be “matching second tiers on rates” and should instead “have proposition-led discussions when competing with second tiers”.

The unnamed executive made reference to enhancing branch support services and introducing cashback offers.

“Despite this apparent change in dynamic, based on the available evidence, we did not observe the big four banks aiming to match the headline variable rates offered by other lenders when considering their headline rate decisions,” the ACCC stated.

However, the ACCC found that despite their reluctance to reduce headline variable mortgage rates, the big four increased discounts for new loans.

“This may have been driven, at least in part, by competition from other lenders,” the ACCC noted.

This is one of several findings from the ACCC’s interim report, which include confirmation that profitability concerns were a key factor influencing the big four’s pricing decisions, and that the lenders profited off “lag periods” between interest rate announcement and effective dates. 

Mr Frydenberg and Assistant Treasurer Michael Sukkar have said that the report “underline the importance of greater transparency and competition in the sector and need for customers to remain highly engaged and shop around to get access to the best deal – including from their existing financial institution”.

The ACCC’s final report, which will examine the impediments to home loan switching and provide recommendations, was due to be released in September 2020.

However, in light of the coronavirus pandemic, the federal government has announced that it will postpone the release to 30 November 2020.

[Related: Treasury calls for greater transparency in home loans]

nab cba westpac anz new ta

Charbel Kadib


Charbel Kadib is the news editor on The Adviser and Mortgage Business.

Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.

Email Charbel on: [email protected]

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