The ACCC's interim report on its residential mortgage price enquiry was released yesterday, covering the five banks affected by the Government's major bank levy: that is, the Big Four plus Macquarie Bank. This inquiry is the first task undertaken by the ACCC's Financial Services Unit, formed as a permanent unit last year, backed by extra funding from the Australian Government in the 2017-18 budget and beyond.This interim report examined "the motivations, influences, and processes behind the residential mortgage pricing decisions of the five banks during the period 1 July 2015 to 30 June 2017". As the ACCC explained, this was needed to get a pricing baseline prior to the introduction of the levy. The final report of this inquiry will use that information to determine if the banks have adjusted their pricing in response to the Government's major bank levy.It has also given the competition regulator a prime opportunity to take a different view on the mortgage market - and the results are not flattering to the majors. The tone was set early on, with the observation by the ACCC that its inquiry had found "signs of less-than-vigorous price competition, especially between the Big Four banks." "We do not often see the Big Four banks vying to offer borrowers the lowest interest rates. Their pricing behaviour seems more accommodating and consistent with maintaining current positions," ACCC chairman Rod Sims said."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'."The ACCC also found that discounts are a major factor in the interest rates customers are paying. Banks offer varying levels of discounts, both advertised and discretionary, but the latter are not always transparent to consumers.During the two years to June 2017, the average discount across the five banks under review on variable interest rate loans was 78 to 139 basis points off the relevant headline interest rate.The criteria used by different banks for determining the total discount offered to borrowers includes many factors, such as the individual borrower's characteristics, their value or potential value to the bank, and their ability to negotiate - none of which was apparent to borrowers."The discounting by the big banks lacks transparency and it's almost impossible for customers to obtain accurate interest rate comparisons without investing a great deal of time and effort. But the potential savings from these discounts are immense," Sims said.The report also found the average interest rates paid for basic, 'no frills' or white label loans are often higher than for standard loans at the same bank."We think many customers who opted for 'basic' or 'no frills' loans thinking they are saving money would be surprised to learn they might actually be paying more."The report's other key findings include:•    existing residential mortgage borrowers paid higher interest rates than new borrowers at the same bank - on average up to 32 basis points more, in the two years to 30 June 2017;•    a large majority of borrowers are