The fundamental step to getting a cheaper mortgage rate

ACCC shines light on uncompetitive banks

The ACCC's residential mortgage price enquiry has formally set out what the industry has known for a long time. Australia's big four banks often move in step with one another.

The draft report has shone light on the "less-than-vigorous" price competition amongst Australia's biggest banks which hold a dominant 75% share of the market.

A rational person would think four banks competing against each other would be enough to drive competition, but the reality is something quite different. Australia's major banks are more inclined to maintain the status quo.

When one shifts rates, the other three often follow suit like a flock of sheep. Even their marketing is eerily similar.

Look through any of the big four's package rates and you'll find promises of huge fee waivers coupled with meaty discounts.

But when you hold these products up to the rest of the pack, you'll see they're actually high-fee products with rates that don't come close to matching the lowest offers.

With more than 100 lenders on the market, many with much lower rates than the big four, it is hard to come up with a logical reason why Australians continue to bank with the establishment.

The inquiry also found new customers are often given lower rates for the exact same product. In fact, the ACCC found existing mortgage holders were being charged 32 basis points more than new borrowers on standard variable interest rate loans.

It's worth remembering that the banks operate on a "don't-ask, don't get" basis.

To secure a cheaper rate, you need to take a fundamental first step: ask.

Find out what your bank is offering new customers, and what other lenders on the market might offer you. Then confront your bank with the cold hard truth. Often you'll find your bank has got nowhere else to go but to offer up a rate cut.

RateCity.com.au data shows the lowest variable rate on our database is 3.39% for owner-occupiers paying principal and interest. There's your first bargaining chip right there.

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