ACCC halts ANZ and Suncorp merger – what this means for refinancing

The consumer watchdog’s concerns that led to its denial of authorisation for the merger included a lessening of competition in the Australian mortgage market, as well as an increased likelihood of coordination between the big banks around home loans. With more than a third of Australian households having a mortgage, with loans totalling around two trillion dollars, the merger’s potential flow-on effects on competition could be significant.

ACCC deputy chair, Mick Keogh, described “second-tier” banks such as Suncorp as important competitors to the big banks, due to the high barriers to new entry into banking at scale, adding that evidence “strongly indicates that the major banks consider the second-tier banks to be a competitive threat.”

“The proposed acquisition of Suncorp Bank by ANZ would further entrench an oligopoly market structure that is concentrated, with the four major banks dominating. It also limits the options for second-tier banks to combine and strengthen in a way that would create a greater competitive threat to the major banks.”

The ACCC was also concerned that if the merger led to a smaller number of bigger banks operating in the Australian mortgage space, these banks would be more likely to coordinate, adopting a “live and let live” approach to protect their existing market shares rather than competing strongly for customers on price, service, and more.

Mr Keogh gave the recent example of big banks choosing to roll back their competitive cashback offers as a possible example of market coordination, saying that “if this market was truly competitive, we would not expect to see banks publicly flagging plans to reduce the competitiveness of their offerings."

As for alternatives to the ANZ merger, the ACCC said that Suncorp could continue largely as it is now, or consider merging with or being acquired by another second-tier bank, such as Bendigo and Adelaide Bank.

In response to the ACCC’s announcement, Suncorp Group chairman, Christine McLoughlin, said Suncorp was “surprised and disappointed”, and that Suncorp determined alongside external experts that the proposed ANZ merger “would not adversely impact the competitive dynamics in the markets in which we operate.”

ANZ CEO, Shayne Elliott, said that ANZ was “naturally disappointed”, disagreed with the decision, and believed that the acquisition would have improved competition to the benefit of Australian consumers, particularly in Queensland.

Many Australians are refinancing their home loans at present, with the Australian Bureau of Statistics (ABS) finding that $20.18 billion of loans were refinanced in June – the third highest on record.

As the ACCC points out, while major banks are withdrawing some of their more competitive offers, such as cashback deals, alternative lenders remain strong competitors.

If you’re one of the many Australians facing the fixed rate cliff, or looking down the barrel of interest rates being raised out of cycle from the RBA, comparing different mortgage lenders could provide you with a suite of alternative home loan options.

Keep in mind that even if you get a home loan with a smaller lender, and your lender is later bought out by or merges with another lender, this should not affect your home loan in most cases. While your accounts and financial products may remain the same, they may now be dressed up in the new brand’s corporate colours and be using the new owner’s name.

But while some smaller lenders may offer competitive home loan offers and other benefits, such as local branch access with personal customer service, not every mortgage deal will be suited to your needs. Be sure to consider your personal finances and goals before you compare lenders and make a home loan switch.