The chairman of the Australian Competition and Consumer Commission has revealed that there will be some “surprises” in the upcoming draft report into how the banks price residential mortgage products.
The inquiry into how the major banks price their mortgage is the first undertaking of the ACCC’s new Financial Sector Competition Unit, which is tasked with undertaking regular inquiries into specific competition issues across the financial sector.
Starting with the $1.2 million inquiry into residential mortgage product pricing, the ACCC is aiming to understand how the banks affected by the major bank levy explain any changes or proposed changes to fees, charges or interest rates in relation to residential mortgage products.
The inquiry relates to prices charged until 30 June 2018.
Speaking to The Adviser in May 2017, ACCC chairman Rod Sims said: “The purpose of this inquiry is to provide customers with greater understanding on how the major banks price their mortgage products and increase transparency around any changes or proposed changes to fees, charges or interest rates in relation to these products.”
In comments made to The Australian Financial Review and confirmed by the ACCC, Mr Sims noted that the commission’s draft report into mortgage pricing will be released in February or March and will contain “some surprises”.
Mr Sims said: “We were asked by the Treasurer to do an inquiry much like we are doing with gas and electricity… to get prices down and the market working as it should,” Mr Sims said.
“We will be bringing out a draft report in February or March which will provide more transparency on how the banks make their interest rate decisions and how the market structure and the level of competition in the banking sector impacts those decisions… that will be quite an important report… there are some surprises.”
While details of these surprises have not been revealed, there have been some suggestions that the banks could be passing on the cost of the government’s new major bank levy and macro-prudential measures to customers. AFG CEO David Bailey last year warned that “history suggests the big banks will undoubtedly pass this new cost on”.
Mr Bailey said: “The extent to which they are able to pass this levy on will depend on how strong our regulators are with the new supervisory powers also announced on budget night.”
The corporate watchdog has also previously warned that the big banks could be in breach of the ASIC Act over the reasons given for hiking interest rates.
However, some major bank heads, such as NAB chief executive Andrew Thorburn, have said that the major bank tax will “impact millions of everyday Australians” as any tax ”cannot be absorbed”. Likewise, Westpac CEO Brian Hartzer said that “the cost of any new tax is ultimately borne by shareholders, borrowers, depositors and employees.”