A credit union is campaigning for clearer home loan rate advertising from lenders, saying very few Australians know how to correctly interpret bank advertisements’ financial content.
Consumer research by People’s Choice Credit Union showed 70.4% out of 1520 people surveyed thought bank adverts were ‘confusing’ and 64.7% believed they were ‘misleading’.
Only a third of the people (33.1%) thought the adverts were ‘honest’ and just 26.4% believed they were ‘clear’.
The results were similar regardless of whether respondents spoke English as a first language or not.
The survey participants’ confusion was confirmed when they were asked to compare home loan advertisements and select which offered the best deal.
There were three pairs of adverts, with each showing a ‘nominal’ interest rate and a ‘comparison’ interest rate.
Only 12.6% of respondents correctly selected the best deal in each of the three scenarios.
People’s Choice managing director Peter Evers said banks must change the way they advertise to make sure consumers understand what the best deal is – which will put lenders under more pressure to provide it.
“The financial regulators have laid down the rules which say we have to advertise this way, but it’s not delivering, it’s not giving people what they need, so we have to think again,” he said.
“Regulation is meant to protect consumers, but right now it’s letting them down.”
However, the Financial System Inquiry provides the opportunity for reform, Evers said.
“When barely one in ten ordinary Australians can correctly understand the core information that’s contained in every home loan advert, then something is clearly wrong,” he said.
“If you don’t get the best mortgage deal, it’s going to cost you thousands and thousands of dollars…How can competition between financial institutions be effective if people don’t understand what’s on offer?”
Australia needs a banking system where consumers are informed, confident and do not have to “wade through the fine print” to determine the best deal, Evers said.
Credit union slams Big Four for misleading consumers
How to make sure your don't mislead consumers: ACCC
Cash-back firm urges clients to leave brokers