Australian mortgage-holders are losing thousands of dollars by not checking the market for better rates, an inquiry into home loans has found.
The revelation came as the government released the Australian Competition and Consumer Commission’s final report from its home loan price inquiry.
The inquiry began at the end of 2019, examining the barriers faced by borrowers when switching to an alternative mortgage supplier.
The report said Australians looking to switch lenders or home loan products faced hurdles at every step, from when they began shopping around to when they requested a change in their loan.
The inquiry found that new borrowers received better deals than existing borrowers, and the older a loan got, the worse off the borrower was.
Borrowers who asked for a better loan deal, or switched lenders, could save thousands of dollars in the first year alone. The savings could translate to $17,000 over the life of a $250,000 loan.
But despite the “significant gains” on offer to those switching home loans, the report found too many borrowers did not search the market for better deals.
The ACCC has put forward four recommendations to ensure the process is more transparent, including a requirement for lenders to update borrowers annually on how their interest rate compares to the average paid for new loans.
There are more than 100 loan lenders across Australia offering almost 4000 different home loan products, but borrowers often find pricing information too difficult to locate and understand.
Those who did take action to switch loans were often met with a confusing or expensive process, causing them to give up.
In response, the ACCC called for lenders to be obliged to provide a standardised cancellation form, and complete their discharge process within 10 days. Because lenders wanted to maintain clients, they were not incentivised to make the changes themselves, it said.
The federal government will now consider the report’s recommendations.
Treasurer Josh Frydenberg said the government was working to “empower consumers to more easily compare and switch between home loan products and lenders”.
“The findings underscore the government’s continued commitment to a number of major reforms to increase competition across the banking industry,” he said.
The inquiry released its interim report in April, finding borrowers often ended up paying higher rates than those advertised due to discounts offered by banks.