Key facts sheets nowhere to be seen

Consumer group Choice has conducted a small, informal shadow shopping exercise to see how the banks are dealing with the new requirement to issue home-loan key facts sheets to consumers making inquiries. The result: not one KFS was issued at any of the branches Choice visited.

Choice staff posed as first-home buyers asking about a $300,000 home loan. On each occasion they asked for information to take away - a question that should have prompted the branch staff member to produce a KFS.

Choice's head of campaigns, Matt Levey, said: "We are concerned to find that banks are not making them available."

Since January 1 lenders have been required to give home-loan borrowers a KFS upon request. The idea is to provide information about the loan in a standard format, so it is easier for borrowers to compare loans and shop around.

The information that must be presented in a KFS includes the repayment method, the frequency of repayments, the interest rate and the comparison rate.

The KFS should also detail the term of the loan and the interest type, the amount of any establishment fee, monthly fees and the impact of interest rate changes on monthly payments. It should also provide an estimated cost of the loan - the total amount to be paid back over the life of the loan.

A KFS is not required for borrowers applying for a commercial loan or for a top-up of an existing loan.

While consumer groups such as Choice have lobbied for the introduction of simple comparison sheets and see them as a valuable tool, others in the industry are not so impressed.

In a submission to Treasury, made in April last year, the Credit Ombudsman Service said:  "The actual total cost of a long-term loan such as a typical Australian home loan cannot be determined until the credit contract comes to an end.

"The cost will depend on a myriad of things, including the actions of the borrower and the lender and also on external events, such as economic conditions, competition, changes in the market, regulation and so on.

"All of these are impossible to predict, particularly given that home loan terms can be as long as 25 to 30 years. We question whether there is any practical value for home loan borrowers in having predictions about total cost in the key facts sheet.

"Using estimates of total cost as the basis for comparing and choosing between different home loans will be unreliable and even possibly dangerous."