Interest rates on deposits, home loans in spotlight
The Australian Consumer and Competition Commission has announced it will investigate how banks set interest rates for savers, including differences in interest rate increases between bank deposits and home loans.
The investigation comes in the wake of mounting criticism from sections of the media and politicians about banks being quick to pass on interest rate rises to their home loan customers but slow to give customers with savings accounts the corresponding boosts in interest rates.
Under Part VIIA of the Competition and Consumer Act, the Treasurer can direct the ACCC to hold a price inquiry into a specified matter.
By holding an inquiry, the ACCC can use compulsory information-gathering powers to gather information from financial institutions including their decision making documents.
“We welcome this direction from the government to shine a light on the retail deposit market and rate-setting decisions of banks” ACCC chair Gina Cass-Gottlieb said. “We are aware that deposit and savings accounts are an important source of income for many Australians, typically supplementing their income from employment, superannuation and the pension.”
Australian households together hold more than $1.3 trillion in savings and deposit accounts, the ACCC said.
As the cash rate target set by the RBA has increased from 0.1% to 3.35%, in most cases banks have fully passed on the official cash rate increases to their home loan interest rates.
However, the increases in interest rates on deposit products appear to have typically been smaller and less consistent, the ACCC said. In many cases, banks have only applied increases in the cash rate to some of their deposit products, often with conditions attached.
“We will also examine the extent to which consumers can benefit from shopping around and switching, and what other barriers are stopping consumers from seeking a better return on their savings,” Cass-Gottlieb said.
In undertaking the inquiry, the ACCC said it would consult closely with financial regulators, including the RBA, the APRA and the ASIC.
The ACCC is expected to release an issues paper in the coming months, and is directed to report to the Treasurer by December 1, 2023.
Under Part VIIA of the Competition and Consumer Act, the Treasurer can direct the ACCC to hold a price inquiry into a specified matter.
By holding an inquiry under Part VIIA of the Competition and Consumer Act, the ACCC can use compulsory information-gathering powers to gather information from financial institutions including their decision making documents.
