Open Banking means home loans will become more complicated. Open Banking is the next wave of innovation to hit the Australian Finance Industry. It is a way for sharing all of your banking data.
Large corporations are spruiking this as a game changer and will make it easier to switch lenders. Together with Comprehensive Credit Reporting (CCR) Open Banking is working to make finance a whole lot easier for the end user.
One such advantage is that you are going to be able to view all your financial accounts such as bank accounts, home loans, credit cards, super and other loans all through the one application. Open Banking makes it much easier to see that you’re getting ripped of by your current provider.
The latest ACCC banking inquiry is a timely reminder of the issues open banking may help solve. “Loyalty tax” is when a bank jack’s the rate of your home loans up over time.
By the way, this is the 57th inquiry into the banking system since the GFC It makes you think politicians and the big banks are actually just looking after each other.
Applications like the one mentioned are going to make it easier for consumers to avoid the loyalty tax.
The banking industry are saying those who operate their accounts well are going to reap the benefits of decreased interest rates. Consumers will find it’s a bit of a red herring. Remember, any business will use any changes to exploit the maximum profit possible. And we all know how banks looooooove profit.
My best guess is that rates will not decrease, they will remain the same – for the good customers. For the customers that Open Banking shows negative information for this will be a way for home loan providers to increase interest rates. Negative information would be things such as late loan repayments, irregular wage payments (maybe due to overtime or different hours), a large amount of discretionary spending and overdrawn accounts. The more I think about it the more nit picking you can do because of the sheer volume of data.
In the short-term banks will use this to increase profits. I’m sure of it.
Open Banking will eventually be a good thing. However, I don’t think you should think that every thing will change tomorrow. I think you need to keep to your long-term plans and view Open Banking as just another distraction until you can actually get benefit out of it.
Check out last week’s blog 3 Tips To Recession Proof Your Finances
Will Bell Mortgage Broker is a mortgage and finance broker based in Melbourne specializing in residential home loans. Will is all about the average Australian understanding just enough of the broader economy to take action on your own personal economy. He is the host of the My Personal Economy Podcast.
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