Warning of mortgage stress with interest rates set to rise

Homeowners with mortgages should start planning for interest rate rises from June.

The four big banks have this week announced they will look at increasing rates which have been at a record low.

Economic experts have warned a one per cent interest rate hike could see more than half (58 per cent) of Australians with a home loan in mortgage stress.

Analyst reports suggest an estimated 1.5 million households with a mortgage are already spending more than they earn.

The Great Australian Rip Off consumer campaign is urging homeowners who have a mortgage to research their refinancing options now and consider a fixed rate.

"It would be the first interest rate rise in almost 11 years and with homeowners already struggling with soaring cost of living expenses it is going to put millions of hardworking Australians under pressure," campaign spokesperson and consumer advocate, Trond Smith said.

The Great Australian Rip Off campaign is uniting consumers to try to bring down the cost of living.

The campaign, launched ahead of the Federal election, exposes ‘secret’ commissions of up to 60 per cent that are paid to brokers, commercial comparison websites, and third parties which are pushing up the price of insurance premiums.

"The commercial comparison sites claim to save you time and money, but secret and very high commissions have been found to be a big driver in pushing up the general cost of premiums and insurers have admitted at multiple inquiries," Mr Smith said.

The Australian Competition and Consumer Commission (ACCC) has recommended an industry code to expose the ‘secret’ commissions and for penalties to protect consumers, but the recommendations have so far been ignored by government.

"There needs to be a mandatory code to expose commissions, expose commercial relationships between brokers, commercial comparison websites and third-parties with suppliers, and impose penalties for breaches of the code," Mr Smith said.

"The advice for people who are worried about household budgets is to do their research both in regard to their mortgage options as well as shopping around when it comes to insurance and other services such as electricity."

About the campaign

We know the cost of living is going up and ‘The Great Australian Rip Off’ campaign is uniting consumers to create political pressure ahead of the Federal Election.

Millions of Australians are unknowingly paying higher premiums and bigger bills to cover the cost of the ‘secret’ commissions collected by commercial comparison websites.

The industry blows the whistle

A CHOICE ‘Review of insurance comparison websites’2017. found commissions had adverse impacts on consumers.

One comparison website was paid a commission of up to 60 per cent every time it sold a new life insurance product.

BUPA told the CHOICE Review:

"Comparators claim as much as 40 per cent of the first year’s premium as their commission for informing people of their choice. This fee doesn’t go to buying health services for anyone; it is taken off the table, must be absorbed somewhere and leads to higher premiums for everyone in the long run".

Admissions consumers are paying

Four of Australia’s largest insurers – IAG, Suncorp, QBE, and Allianz, boycott commercial comparison websites because of the extra costs that would need to be passed on to consumers.

In a submission to a Senate Economics References Committee, inquiry into Australia’s General Insurance Industry (2017) Allianz wrote:

"Allianz chooses not to participate in commercial comparison sites in Australia. They charge a fee for their service and therefore impose an unnecessary additional distribution cost that would need to be passed on to our consumers in the form of higher premiums".

Consumer watchdog recommends action

The Australian Competition and Consumer Commission (ACCC) following its Retail Electricity Pricing Inquiry (2018) recommended regulatory action to mandate full disclosure of commissions and penalties for breaches.

What the campaign is calling for

The Great Australian Rip Off campaign is uniting consumers to make cost of living and transparency core election issues.

By joining the campaign, you are asking for a commitment to two regulatory actions:

Implement Recommendation 34 of the ACCC 2018 Retail Electricity Pricing Inquiry—Final Report: The Australian Government should prescribe a mandatory code of conduct for third-party intermediaries, which addresses the issues discussed in chapter 14. For example, offers should be recommended based on price benefit to the consumer rather than the size of the commission received by the third party. The code should contain civil penalty provisions for any breaches. (p.282)

Mandate full disclosure of all commissions, payments, and other incentives in the relationships between commercial comparator websites and suppliers.

How you can take action

Join the campaign. Add your name by signing up and an email will be sent, on your behalf, to your local Federal MP asking

• Do they agree with the ACCC’s recommendation for regulatory action to mandate the disclosure of commissions to commercial comparison websites?
• Will they give an undertaking to make it an election issue?

Make it an election issue

Send a personal email or letter to your local Federal candidates asking them to promise to introduce a Private Members Bill to implement the ACCC’s Recommendation 34 for mandatory disclosure and publicly declare the need for greater transparency in the industry as part of their election platform.

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