ACCC slams home loan ‘competition’
BRISBANE: Mortgage rate discounts offered by Australia’s big banks resemble synchronised swimming more than vigorous competition, the head of the national competition watchdog says.
Australian Competition and Consumer Commission (ACCC) chairman Rod Sims says a recent report by his organisation found that discounting is not ‘‘synonymous with vigorous price competition’’ and competition in the banking sector may be an illusion.
Mr Sims said internal documents reviewed by the ACCC reveal a lack of vigorous price competition between ANZ, Commonwealth, NAB, Westpac and Macquarie.
‘‘In fact, their behaviour more resembles synchronised swimming than it does vigorous competition,’’ Mr Sims told the Australian Financial Review banking and wealth summit in Sydney.
‘‘What we found is that the pricing behaviour . . . appears more consistent with accommodating a shared interest in avoiding the disruption of mutually beneficial pricing outcomes, rather than vying for market share by offering the lowest interest rates.’’
Mr Sims said the big four banks, which account for about 80% of the nation’s outstanding home loans, largely focus on each other when setting rates, rather than what smaller lenders are doing.
The banks had rarely competed by offering the lowest headline variable interest rate to borrowers and usually moved their interest rates at the same time, he said.
Mr Sims also said discounts were not really discounts, considering prices were already inflated.
‘‘If a monopolist or oligopolist offers a 10% discount on a price already inflated by market power, we wouldn’t say this is evidence of vigorous price competition,’’ he said. — AAP