“Set and forget” persists on home loans

The consumer watchdog wants banks to be forced to push their customers if they pay too much for home loans.

The ‘set and forget’ mentality meant consumer inertia was always an issue, Australian Competition and Consumer Commission chairman Rod Sims said at a parliamentary hearing on Wednesday.

The Watchdog’s Home Loan Pricing Survey last year also revealed awkward “first book” and “back book” practices at banks that prevented potential borrowers from determining true costs.

Borrowers with three to five year home loans paid on average about 58 basis points more than the average interest rate charged on new loans in the front book.

Commissioner Sarah Court described three obstacles to changing home loans.

People weren’t engaged once they got a loan, high research fees and unclear costs made it difficult to compare products, and banks’ own red tape often frustrated the execution of the project. ready.

Ms Court said requiring and tailoring a regular prompt to a loan amount or interest rate, or average benchmark, and weighing the regulatory burden on lenders all need to be considered.

“We are actively engaged in finding out what works and what doesn’t,” she said.

But more consumer testing and research would be needed, even after the government accepts the recommendation.

“We need to make sure communications are clear and designed to grab the attention of consumers.”

The corporate watchdog, the Australian Securities and Investments Commission, is also looking at consumer and market behavior and what might work to increase fairness.

About Thomas Thorton

Check Also

Mortgage rates are expected to stay low for some time

If you’re planning on borrowing soon, that’s great news. Mortgage interest rates have hit record …

Leave a Reply

Your email address will not be published.