Mortgage switching too late to stop ACCC redo

Ian Rogers and John Kavanagh Mortgages

There are stirrings of a shift in mortgage market share, on AFG data anyway, but too late for the big banks that will subjected to another ACCC inquiry into their conduct.

The government has directed the ACCC “to investigate the pricing of residential mortgages,” The Australian reports.

The ACCC reported on precisely this topic (in a slightly narrower context) as recently as December last year. The heavyweights in the ABA will be wondering “why bother” and swerve around the worst it as they normally do, finding other profit levers to pull.

The Australian reports that the inquiry “is designed to force full disclosure and transparency around bank pricing practices.

“The inquiry will also assess the reasons for the difference in rates paid by new and existing customers as well as the disparity between the reference interest rates published to those paid by customers.”

The inquiry will cover the period from January this year with the ACCC asked to report by March 2020.
It will also cover a lot of familiar ground, the Productivity Commission in August last year having slammed APRA as much as banks for this mischief, while the ACCC explained the basics of the racket: synchronised pricing and "the lack of transparency in discretionary discounts making it unnecessarily difficult and more costly for borrowers to discover the best price offers."

The ACCC is working on a neat tool it will wholesale to the flawed rates comparisons of conflicted comparison websites (Finder, Infochoice, iSelect and so on). The ACCC will produce an “indicator rate” that may be of great use to consumers and force mortgage brokers and banks and the comparison fee collectors to adjust business models in a manner that lowers the cost of credit.

A routine quarterly report from mortgage aggregator AFG sheds light on probable evidence of consumers jumping from big banks to other lenders.
Non-major banks accounted for near 50 per cent of lodgements with mortgage aggregator AFG during the September quarter – the highest share since 2007.

AFG reports in its latest quarterly index that its brokers’ loan volumes picked up in the quarter, with a record A$15.7 billion of lodgements. Volume was up 21 per cent on the previous quarter.

More than 29,000 mortgages were lodged during the quarter – the highest in almost two years.

The average mortgage size was $539,934 and the average loan-to-valuation ratio was 70.1 per cent

Following recent rate cuts demand has swung away from interest-only loans to principal and interest. During the September quarter 82 per cent of lodgements with AFG were for P&I loans – the highest proportion recorded by AFG.

Among the small lenders, Macquarie Bank and AMP Bank had the strongest growth in share. Macquarie’s share of AFG broker loans has increased from 4.6 per cent to 11.4 per cent over the past 12 months, while AMP’s has increased from 1.8 per cent to 3.6 per cent over the same period.

Other lenders with significant share include ING, with 3.6 per cent, Resimac (2.4 per cent), Suncorp (2.4 per cent) and  ME (2 per cent)

ANZ’s share has fallen from 12.7 per cent to 9.1 per cent over the past year. NAB’s share has fallen from 11.8 per cent to 7.9 per cent.

The share of Westpac and its subsidiaries has fallen from 15.4 per cent to 13.2 per cent.

Commonwealth Bank and its subsidiary Bankwest have bucked the trend. The group’s combined share of AFG broker loans has increased from 18.9 per cent to 23.8 per cent over the 12 months.