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An Exploratory Study of Regulatory Failure in the Australian Home Mortgage Market

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  • Gavin Nicholson
  • Ross Skelton
  • Julie‐Anne Tarr

Abstract

Regulators have long been interested in protecting consumers borrowing for a home as it is likely the single greatest financial obligation they will undertake. In this paper we examine the approach taken in Australia to mandating the disclosure of simple comparison data to reduce the complexity involved in the home loan decision. This article highlights that while the form of the legislated disclosure significantly improves decision accuracy, the failure of the regulator to account for the consumer's purchase behavior and lenders' motivations has undermined its effectiveness. We provide a number of recommendations for how to rectify these failings, principally that regulators need to consider the role of borrower information search and lender motivation as part of any regulatory reform.

Suggested Citation

  • Gavin Nicholson & Ross Skelton & Julie‐Anne Tarr, 2019. "An Exploratory Study of Regulatory Failure in the Australian Home Mortgage Market," Journal of Consumer Affairs, Wiley Blackwell, vol. 53(1), pages 126-166, March.
    • Handle: RePEc:bla:jconsa:v:53:y:2019:i:1:p:126-166
    DOI: 10.1111/joca.12200
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    Cited by:

    1. Olivier Mesly & David W. Shanafelt & Nicolas Huck & François‐Éric Racicot, 2020. "From wheel of fortune to wheel of misfortune: Financial crises, cycles, and consumer predation," Journal of Consumer Affairs, Wiley Blackwell, vol. 54(4), pages 1195-1212, December.

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