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It would be “unfathomable” for policymakers to consider regulatory change that would undermine the competitive utility of the broker channel in light of “damning evidence” produced by the ACCC, according to AFG.
The Australian Finance Group (AFG) has said that the “damning evidence” outlined in the Australian Competition and Consumer Commission’s (ACCC) final report into residential mortgage pricing highlighted the importance of fostering market competition through the broker channel.
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The ACCC found that opacity is rife in advertised headline interest rates for mortgages, causing inefficiency and stifling price competition. In its report, the ACCC also accused ANZ, the Commonwealth Bank of Australia (CBA), NAB, Westpac and Macquarie (the “inquiry banks”) of engaging in “synchronised” pricing behaviour, pointing to the banks’ pricing response to the prudential regulator’s 30 per cent cap on interest-only lending.
The ACCC also noted in its report that consumer choice and competitive pressure from smaller lenders would be threatened by any regulatory measures that affect the role of mortgage brokers. Reflecting on the ACCC’s findings, AFG chief executive officer David Bailey said: “The ACCC has highlighted how important the role of mortgage brokers is in creating a market where consumers are offered the widest choice of lenders at the lowest prices.
“If Australia’s competition watchdog has concluded that the pricing of mortgages in Australia is opaque, how are consumers expected to navigate the variety of home loans without the assistance of their local mortgage broker?”
Mr Bailey noted that the ACCC’s report would be considered by policymakers in preparation for the regulatory response to the financial services royal commission, adding that the competition watchdog has joined Treasury and the Productivity Commission in demonstrating the benefits to consumers of a competitive home loan market.
“In a world where we have the ACCC declaring that Australia’s home loan market is lacking competition, price leadership is effectively as damaging as actual collusion,” he said.
The AFG CEO concluded: “This is why mortgage brokers are so important. It would be unfathomable for policymakers to consider taking steps which would limit competition by impacting the very channel that has been increasingly embraced by consumers for the competition and choice the channel delivers.”
Mr Bailey’s remarks follow comments from the Finance Brokers Association of Australia (FBAA) and the Mortgage and Finance Association of Australia (MFAA), which noted that the ACCC report has presented brokers with an “opportunity” to demonstrate their utility to borrowers.
