I kicked off 2012 with a Tweet where I asked followers what they thought the biggest issues would be in the new year. The first response was mortgage interest rates and the domination of the big banks.

It’s an interesting concept and one which I think Australians have been sold short on. What do I mean by this? Simply that the solution to the problem of high mortgage rates and mortgage domination by a few players is almost entirely the result of borrowers’ choice.

There is an interesting situation in Australia right now where the big four trading banks write more than 90 per cent of all new mortgages. That’s a highly dominant position by world standards. You’d expect that the reason four banks write nine out of ten mortgages is that they offer lower rates – something you’d expect given the scale that such market dominance affords.

But the big four are not cheaper: Canstar’s RateCity comparison tables were posted on January 3 and I was having a look, seeing who was offering what right at the start of the New Year. I was struck by how much more expensive the banks were: their standard variable rate mortgages were bunched together, from NAB’s 7.22 per cent to Westpac’s 7.36 per cent; Commonwealth’s 7.31 per cent and ANZ’s 7.30 per cent were in the middle. Yet there were more than 20 mortgage lenders with standard available rates around 1 per cent cheaper than the big banks. These are credit unions and non-bank lenders, mostly.

We also know that the government changed the law last year so that Australians could switch from their current mortgage to another one without paying penalties – the exit fee ban. And we also know that because of the internet and the rise of mortgage brokers, there’s never been as much information available as there is now.

From my perspective it’s clear that mortgage interest rates are high for 90 per cent of Australians because they choose to have it this way. I experienced this a decade ago when I was the executive chairman of Wizard Home Loans. Together with other non-bank lenders – Aussie and RAMS – we offered mortgages with better prices, service and products. By 2003, non-bank lenders had around 15 per cent of the mortgage market and banks had halved their mortgage margins. Now? Non-banks have 1 per cent of the mortgage market and their interest rates are much lower than the bank competition.

The answer ten years ago was the same as it is today. If borrowers want the best deal for themselves they have to exercise their right to choose.

That’s what makes a vibrant free market: providers making their best offer, and consumers making a choice.

* Mark Bouris is the Executive Chairman of Yellow Brick Road, a financial services company offering home loans, financial planning, accounting & tax and insurance. Email Mark on mark.neos@ybr.com.au with any queries you may have or check www.ybr.com.au for your nearest branch.