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Property investors, young borrowers could find it harder to borrow, though
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This weekend the ACCC released its highly anticipated report into the mortgage industry, and it has made a number of recommendations that could have far-reaching effects.
The thrust of the report’s findings is that consumers who don’t shop around, don’t get the savings that others do. And if the general public pay attention, who better to shop around on behalf of a borrower than a mortgage broker?
One of the possible effects of the report could be more churn – the ACCC found that clients who had held a mortgage longer were more likely to be paying a premium, compared to new borrowers. Mortgageholders, for example, that had held the same loan for more between 3 and 5 years were paying 58 points more than someone who had recently taken out a mortgage.
So what does the ACCC think it can do to help improve the system?
It has four major recommendations:
- Borrowers with a Standard Variable Rate mortgage over 3 years old should get an annual ‘nudge’ telling them what the best rates in the market are. “Our recommended prompt would clearly set out for many borrowers just how much higher their interest rate is compared to new borrowers,” ACCC Chair Rod Sims said. “This information would be a powerful motivation for borrowers to seek a lower rate from their current lender or to switch to a new lender. It would also encourage lenders to offer existing customers better rates, promoting greater competition in the sector.”
- All banks should use a single standard home loan Discharge Authority form “Existing lenders want to keep their borrowers, so have no incentive to make the discharge process quick or straightforward,” Mr Sims said. “We want it to be as easy as possible for borrowers to switch lenders, as it should be in all markets. Our recommendations are designed to make this process faster, less confusing and less frustrating.”
- All discharge requests to be processed within 10 days.
- ACCC to maintain ongoing monitoring of mortgage pricing and competition in the market. We remain concerned about opaque pricing in the home loan market, but are encouraged that some banks are moving to more transparency without direct intervention from the government,” Mr Sims said. “We are recommending ongoing monitoring of this market so we can ensure that this trend of improved pricing transparency continues. We may recommend further action if it does not.”
Currently, the ACCC seems happy enough with the above suggestions, but have warned that if its continued monitoring finds that “momentum towards price transparency has stalled” it will consider recommending regulatory action.
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