Consumers will be able to compare the cost and features of different home loans by putting one-page facts sheets from different lenders side by side, and comparing the savings they could make between mortgages. A potential home borrower could easily compare the relative cost of a mortgage from a credit union against a big bank.
The Treasury has already developed a pro-forma for the Government’s new key facts sheet which has been released with this announcement, on which the Treasury will undertake targeted consultations with consumer groups and the industry, before releasing exposure draft legislation during the first sittings of Parliament in 2011.
It will be mandatory for lenders to clearly explain to potential home loan customers what every item in the one page facts sheet means for them (e.g. ‘over the life of your loan, you will repay $x for every $1 you have borrowed from us’). Providing this disclosure in advance of the consumer signing up for a home loan will give customers the opportunity to shop around and compare deals.
When considering a home loan offering, or comparing home loans, consumers are currently faced with a large amount of information that they often find difficult to understand.
This initiative will enhance consumer empowerment by improving transparency and standardising terminology between products, to assist consumers to better understand and compare information, and make more informed choices and appropriate product selections.
The Government will work with the industry to minimise any costs of compliance associated with this reform.