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A non-major bank has announced that it will automatically switch customers on legacy mortgages to new products from next month.
AMP Bank has announced that it will begin switching clients with “legacy” home loans to contemporary products, with the same or lower interest rates and fees from 31 May.
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As part of its move to “push to simplify its products”, AMP will begin automatically switching customers on old home loan products to contemporary products from next month.
It is expected that an initial 3,000 clients (5,500 accounts) will be switched, with “further simplification to follow”.
AMP Bank managing director Rod Finch said: “Never before has it been more important to reduce complexity, and this home loan simplification is about making it easier for our clients, as well as our brokers and advisers, to do business with us.
“This latest change follows previous simplification by the bank, including the removal and reduction of more than 40 special service and home loan fees, as well as the transition of clients to contemporary deposit accounts.
“This move will allow us to provide a more focused and competitive offering to our clients, and by reducing complexity, we can focus more of our time on supporting clients, brokers and advisers.
“Importantly, clients will be accessing the benefits and features of a newer product, with about 80 per cent of clients benefiting from a lower interest rate on at least one of their accounts, and no negative impact for the remaining.”
The affected products are:
|
OLD PRODUCT |
CONTEMPORARY PRODUCT |
|
Affinity Fixed Rate |
Select Package |
|
Affinity Basic Fixed Rate |
|
|
Affinity Basic Variable |
|
|
Affinity Line of Credit |
|
|
Affinity T1, Affinity T2 |
|
|
Select T1 |
|
|
Classic Club Line of Credit |
Professional Package |
|
Classic Variable |
|
|
Executive Club Line of Credit |
|
|
Executive Variable |
|
|
Fixed Rate |
|
|
Reducing Flexible Loan Account |
|
|
Special Variable Rate |
|
|
2005 Special Variable Rate |
The move to change products comes amid increasing calls for lenders to make loan rates more transparent and equitable for existing and new customers.
The Australian Competition and Consumer Commission (ACCC) recently released its interim Home Loan Price Inquiry report, which examines how the big four banks (ANZ, CBA, NAB and Westpac) priced their mortgages between 1 January 2019 and 31 October 2019.
The report found that a lack of price transparency and higher interest rates for existing loans continued to cost customers.
For example, at the end of September, customers of the big four bank that had new owner-occupier loans with principal and interest repayments were paying, on average, 26 basis points less than customers with existing loans. The difference was usually even more significant for customers with older loans, with customers who have had their loan for more than five years paying 40 basis points (0.40 per cent) above the price on newer loans.
The ACCC also found that home loan pricing practices continue to make it difficult for consumers to compare different mortgage products.
The Treasury has since said that the ACCC’s interim report findings therefore “underline the importance of greater transparency and competition in the sector and need for customers to remain highly engaged and shop around to get access to the best deal – including from their existing financial institution”.
[Related: Treasury calls for ‘greater transparency’ in home loans]
