ASIC should publish details on median rates, argues Productivity Commission, given almost no clients actually get the SVR
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ASIC should publish details on median rates, argues Productivity Commission, given almost no clients actually get the SVR
Standard variable rates have been sharply criticised by the Productivity Commission, which claims they do not reflect real interest rates paid by customers
As of June 2017, 70% of new NAB loans had discretionary pricing, leading the Commission to note that “overall, it is not evident that a genuine discount is being offered when almost everyone gets it.” It also criticises comparison rates for being based on the SVR.
In its report on Competition in the Australian Financial System, the Commission recommends that ASIC develop an online tool to find median interest rates from the last month. “Such rates would provide a more accurate and consistent benchmark than the SVR, allowing consumers to compare across different products.”
APRA should also collect data on new residential home loans, including LVRs, fees, type of borrowers, type of repayments, credit ratings, employment of borrowers and industry of employment.
Median rates could aid switching
Standard variable rates are in the spotlight because the Commission is concerned not enough Australians are switching financial providers.
Existing customers of lenders tend to pay higher rates; 15% of existing borrowers paid greater than or equal to the standard variable rate (SVR), but just 5% of new borrowers. This equates to an extra $66 to $87 per month on the average home loan balance.
Having ASIC publish median rates would make it easier to switch, the Commission believes, reducing the need to use a broker: “such search costs could include the need to approach lenders individually to initiate bargaining or to make contact with a mortgage broker. This requires more time, effort and commitment than simply searching through lenders’ websites or logging onto comparison websites”
Unsubstantiated claims
The Productivity Commission has made highly critical statements about brokers and interest rates, but without presenting the evidence to back them up.
“Whether you get told it or not, we all pay one way or another for advice on good deals” claims a video produced by the Commission for consumers.
The Commission also reiterates UBS’ much-criticised claim that brokers are “potentially adding 16 basis points in cost to interest rates”.
Yet the Commission also notes that “surprisingly for such a major cost item, most lenders were unable to provide the information required to evaluate whether brokers are a lower-cost distribution network. Cost data appears to be a black box for this industry.”
The Commission’s limited research and reliance on other data sources was heavily criticised by the MFAA and FBAA yesterday.
Frustrated by slow turnarounds, bad service or poor rates? Here’s YOUR chance to do something about it.
MPA’s Brokers on Banks survey is looking for your feedback now. In less than five minutes you can provide the data we need to hold the banks to account and drive real change in the industry.
Click here for the survey. Please do it now, as the survey closes at the end of this week.
Standard variable rates have been sharply criticised by the Productivity Commission, which claims they do not reflect real interest rates paid by customers
As of June 2017, 70% of new NAB loans had discretionary pricing, leading the Commission to note that “overall, it is not evident that a genuine discount is being offered when almost everyone gets it.” It also criticises comparison rates for being based on the SVR.
In its report on Competition in the Australian Financial System, the Commission recommends that ASIC develop an online tool to find median interest rates from the last month. “Such rates would provide a more accurate and consistent benchmark than the SVR, allowing consumers to compare across different products.”
APRA should also collect data on new residential home loans, including LVRs, fees, type of borrowers, type of repayments, credit ratings, employment of borrowers and industry of employment.
Median rates could aid switching
Standard variable rates are in the spotlight because the Commission is concerned not enough Australians are switching financial providers.
Existing customers of lenders tend to pay higher rates; 15% of existing borrowers paid greater than or equal to the standard variable rate (SVR), but just 5% of new borrowers. This equates to an extra $66 to $87 per month on the average home loan balance.
Having ASIC publish median rates would make it easier to switch, the Commission believes, reducing the need to use a broker: “such search costs could include the need to approach lenders individually to initiate bargaining or to make contact with a mortgage broker. This requires more time, effort and commitment than simply searching through lenders’ websites or logging onto comparison websites”
Unsubstantiated claims
The Productivity Commission has made highly critical statements about brokers and interest rates, but without presenting the evidence to back them up.
“Whether you get told it or not, we all pay one way or another for advice on good deals” claims a video produced by the Commission for consumers.
The Commission also reiterates UBS’ much-criticised claim that brokers are “potentially adding 16 basis points in cost to interest rates”.
Yet the Commission also notes that “surprisingly for such a major cost item, most lenders were unable to provide the information required to evaluate whether brokers are a lower-cost distribution network. Cost data appears to be a black box for this industry.”
The Commission’s limited research and reliance on other data sources was heavily criticised by the MFAA and FBAA yesterday.
Frustrated by slow turnarounds, bad service or poor rates? Here’s YOUR chance to do something about it.MPA’s Brokers on Banks survey is looking for your feedback now. In less than five minutes you can provide the data we need to hold the banks to account and drive real change in the industry.
Click here for the survey. Please do it now, as the survey closes at the end of this week.
