The dramatic change coming to Australia’s banking sector that could save mortgage holders tens of thousands of dollars and make it easier to switch lenders – here is what every homeowner needs to know
- Australia’s banking sector could be in for a shake up if lending plan goes ahead
- ACCC wants banks to tell borrowers every year if interest rate was best offer
- Borrowers could save thousands by changing to a bank’s average interest rate
Major changes to how banks offer interest rates could result in homeowners saving tens of thousands of dollars each year.
The Australian Competition and Consumer Commission has found loyal customers are being swindled by banks.
The watchdog wants to make it a requirement for banks to tell borrowers every year what interest rate they are being charged.
The move is to stop loyal customers, many of who leave their variable interest rates unchanged for at least four years, ending up with less competitive rates than new borrowers.
The commission also wants to make it mandatory for banks to reveal what the average rate was on new loans.
An investigation by the Australian Competition and Consumer Commission has found that loyal customers are being swindled by banks over their interest rates (Stock image pictured)
The changes could see customers make big savings by switching to a bank’s average interest rate.
A report by the commission, which is due to be released on Saturday, suggests that someone with a $500,000 loan could save $2,800 in a year or up to $34,000 over the life of the mortgage.
A borrower with a $500,000 loan which had been held for 10 years could save $5,140 in a year and $50,300 overall by switching to their bank’s average rate.
The plan, which is being considered by the Federal Government, comes after the investigation found that more competitive interest rates were only passed on to those signing up for new loans.
The investigation also found that about half of all variable rate loans have been unchanged for at least four years.
Treasurer Josh Frydenberg said there were also ‘unclear, uncertain and lengthy discharge processes’ on home loans, which resulted in many borrowers opting against switching to a better deal
There is widespread confusion about pricing information and switching between banks, the report said.
Customers struggled to find information about different deals and comparing offers.
Treasurer Josh Frydenberg said there were also ‘unclear, uncertain and lengthy discharge processes’ on home loans, which resulted in many borrowers opting against switching to a better deal.
The commission said banks were even incentivised to create such barriers.
It recommended requiring lenders to provide a standardised discharge form to borrowers, meaning the banks would have a maximum of ten days to complete once it was signed by their customers.
Mr Frydenberg said the government would consider the recommendations.