Big four’s ‘muddy water’ mortgages

THE consumer watchdog has lashed out at the lack of competition in the mortgage market and says big banks appear to be muddying the waters so consumers can’t compare loans.

In a new report, the Australian Competition and Consumer Commission raises concerns about potential collusion and says the market is marred by “opaque pricing”.

“We do not often see the big four banks vying to offer borrowers the lowest interest rates,” ACCC chairman Rod Sims said yesterday. “Their pricing behaviour seems more accommodating and consistent with maintaining current [market] positions.

“We have seen various references to not wanting to ‘lead the market down’, to have rates that are ‘mid-ranked’ and to ‘maintain orderly market conduct’,” he said.

The ACCC is examining home loan pricing at the Commonwealth Bank, Westpac, ANZ and National Australia Bank — and Macquarie.

Its interim report, released yesterday, says competition between the banks is weak.

The watchdog said the actions by the major lenders appeared “more consistent with accommodating a shared interest in avoiding disruption of mutually beneficial pricing outcomes”, than competing for market share by offering lower interest rates.

“The big four banks focus largely on each other when they determine headline interest rates and discounts on variable rate residential mortgages,” the report said.

The CBA and Westpac have about 25 per cent of the mortgage market each, and ANZ and NAB 15 per cent each.

Mr Sims also raised the issue of obscure discounting by the big banks, where they offered discounts — some advertised and some “discretionary” — to different groups of people in different circumstances.

Such discounting “lacks transparency”, he said.

Pricing structures and product marketing were also unclear, he said, with the typical no-frills loan often more expensive than standard variable loans within the same bank.

Established customers also paid an average of 0.32 percentage points more than new customers.