News

Differing bank mortgage rates to new and existing customers under watchdog scrutiny

18 October 2019

The competition watchdog is turning an eye towards the difference in mortgage rates offered by banks to new and existing customers.

Banks would face suffering a hit to their profit margins if they were forced to offer existing customers as good a deal as they often to do to new customers in a bid to entice them.

Australian Competition and Consumer Commission chairman Rod Sims said the gap was a show of disrespect from the banks towards their loyal customers.

“Is the message that banks want to send that they are happy to dud their loyal customers?” he told Australian Financial Review.

Mr Sims went on to say he wants an inquiry into the competitive strength of the major banks and left the details of that up to our Treasurer Josh Frydenberg.

Mr Frydenberg said in response the oft-repeated line that the best way to send the banks a message was to press them for a better deal.

“In banking, as in energy, customers get penalised for their loyalty,” he told AFR.

“To win new business banks will offer cheaper rates to new customers, leaving their existing customers in the cold.”

Behind closed doors the banks argue that it is not practical to offer competitive rates to all customers

Banks have again come under pressure for not passing the latest Reserve Bank rate cut on in full, but they say the ultra-low cash rate is hitting their profit margins.

Mr Sims says there’s a disconnect between business and consumers.

“Business, of course, would say why should I give a lower interest rate to someone who is not asking for it, whereas the consumer says I am being loyal to you and you are taking advantage of that loyalty and are understandably outraged,” he said.

“What it means for politicians and regulators is they need to encourage customers to not be loyal.”

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