(Australian Associated Press)
The consumer watchdog wants banks to be required to nudge their clients if they are paying over the odds for home loans.
The “set and forget” mentality meant consumer inertia was still a problem, Australian Competition and Consumer Commission chair Rod Sims told a parliamentary hearing on Wednesday.
The watchdog’s home loan price inquiry last year also found tricky “front book” and “back book” practices at banks that made it difficult for would-be borrowers to figure out true costs.
Borrowers with home loans between three and five years old paid on average about 58 basis points more than the average interest rate charged on new loans in the “front book”.
Commissioner Sarah Court outlined three impediments to switching home loans.
People weren’t engaged once they managed to get a loan, high search charges and unclear costs made it difficult to compare products, and banks’ own red tape often frustrated discharging the loan.
Ms Court said requiring and tailoring a regular prompt to a loan amount or interest rate, or an average reference point, and weighing up the regulatory burden on lenders all needed to be considered.
“We are actively engaged in looking at what works and what doesn’t,” she said.
But consumer testing and more research would be needed, even after the government accepted the recommendation.
“We have to make sure communications are clear and are designed to catch consumers’ attention.”
The corporate watchdog, the Australian Securities and Investments Commission, is also looking at consumer and market behaviour and what could work to increase fairness.