Regulator confirms broader mortgage industry probe

On budget night, Treasurer Scott Morrison directed the Australian Competition & Consumer Commission (ACCC) to conduct an inquiry into residential mortgage products.

As part of this inquiry, the ACCC can compel the banks affected by the bank levy to explain any changes or proposed changes to fees, charges or interest rates in relation to residential mortgage products. The inquiry relates to prices charged until 30 June 2018.

This inquiry will be the first task of the ACCC's newly established Financial Sector Competition Unit, which will receive $13.2 million of funding over four years from 2017/18, with an additional $1.2 million in 2017/18 for the current inquiry.

While the ACCC will deliver a report to Treasury upon completion of its inquiry into mortgage products, Mortgage Business understands that the regulator will then launch "market studies" into a number issues relating to the industry.

On its website, the ACCC states that its "market studies" involve “in-depth market, sector or industry reviews, with the aim of improving our understanding of industry practices and dynamics in those sectors”.

“We publish our reviews in a formal report to help inform consumers, encourage public debate over competition and consumer matters, and inform policy consideration,” the commission states.

Mortgage Business asked the ACCC if its Financial Services Unit (FSU) will be investigating areas of the mortgage market beyond residential mortgage pricing, such as third-party distribution and broker remuneration.

“Separately, in March 2017, ASIC released a report reviewing mortgage broker remuneration,” the ACCC replied. “The Productivity Commission is currently conducting an inquiry into competition issues in the financial sector.

“In the following year, the FSU will commence market studies into these issues. The precise scope of those studies is yet to be determined.”

Asked to confirm exactly which areas it will soon be investigating, the ACCC replied: “The market studies will be across competition issues in the financial services sector.”

Recent market studies conducted by the ACCC include the new car retailing industry, the beef and cattle market, and the communications sector.

Following its investigation into the communications sector, the ACCC is now understood to be taking action against Australia’s four largest telcos.

While the competition watchdog has been unwilling to give too much away about its upcoming market study of the financial services industry, comments made by chairman Rod Sims to The Guardian Australia back in May shed some light on where the ACCC probe may go.

Mr Sims told The Guardian that his information-gathering powers could stretch beyond the major banks, extending to “tier two” banks and brokers in the mortgage market.

“Eventually we could look at a range of things, but for this first year, if we judge that the broker market needed to be looked at, we could do that,” he said.

“We haven’t formed that view yet. We’re just really focused on getting information from the five banks.”

Confirmation of an upcoming market study comes as industry figures begin to question the ACCC’s powers amid ongoing rate hikes and back book repricing by the banks.

More to come.

[Related: ACCC could steer borrowers away from the big four]