Australians may soon be rewarded for their good credit history with cheaper home loan and credit card rates under a new initiative set to be announced by Treasurer Scott Morrison at the Intersekt fintech festival in Melbourne later today.
The changes, which are reported to come into effect from July 1 next year, are expected to help borrowers and customers use their good credit history to leverage better deals from providers on a range of financial products including home loans, personal loans, business loans and credit cards.
"This will be a game-changer for both consumers and lenders, and will lead to greater competition in lending and naturally provide better access to finance for Australian households and small businesses," Mr Morrison is expected to say.
"For borrowers, this regime should lead to one thing - a better deal on your mortgage, your personal loan or business loan.”
The announcement will come as part of a larger mandate which will require ANZ, Commonwealth Bank, NAB and Westpac to share more detailed data about their customers credit history in order to improve competition between providers.
"If you have a good credit history - you're paying down your mortgage, you haven't missed a payment on your car loan and your credit cards are under control - you will be able to demand a better deal on your interest rates, or shop around, armed with your data," Mr Morrison will say.
"We intend to start with the four major banks, given they account for approximately 80 per cent of the volume of lending to households. Other credit providers would likely follow suit quickly to improve their competitive position in the market."
Similar systems which reward customers with better credit history already exist in the United Kingdom and United States, and while the Australian initiative is expected to target home loans at first, the Herald Sun has reported that the Federal Government may extend the rules to cover phone and energy providers in the future.
While the changes are likely to be of benefit to those with better credit history, Mozo Data Manager Peter Marshall expects that some Australians may be worse off.
“It’s going to be great for those who are lucky enough to have a great credit history, but those that do have some blemishes on their record can expect to be paying higher rates,” he said.
“The banks are unlikely to want to give up any of their profit margins, so if some consumers are getting better rates it stands to reason that some consumers will be getting worse rates.”