Swap banks to save

Customers shouldn’t stay with the same bank out of a misguided sense of loyalty, writes

DUE DILIGENCE: Emily Cullin with her 10-month-old son Brooklyn, leaves emotions out of financial decisions. LOYAL mortgage customers who stick with their childhood bank are wasting thousands of dollars by failing to switch.

There’s fierce competition in the nation’s home loan market and customers are being urged to chase down cheaper deals in 2018 to help them save.

New data from digital mortgage broking platform Uno has revealed one in five mortgage customers have their loan with the same bank they did as a child or they simply bank with the same financial institution as their parents.

Uno’s chief executive officer Vincent Turner said loyal owner occupier customers pay, on average, an interest rate of 4.5 per cent, putting them in a worse position than those who are not – they pay on average 4.3 per cent.

Disloyal investors are also getting better deals, paying around 4.6 per cent, while loyal investment loan customers pay an average 4.8 per cent.

“A home loan is one of the biggest financial decisions most people will ever make so it’s important to review the entire landscape of options to ensure you’re getting the best deal,’’ Mr Turner said. “The start of the year is a good time to do anything financially related, you get time to think about the year ahead and you have plenty of time on your hands.”

He also warned that customers often have their savings and loans with the same bank and instead they should “detach those two things” and cherry pick the best deals from multiple financial institutions.

Uno figures found on a $300,000 30-year owner occupier loan, disloyal customers typically pay an average interest rate of 20 basis points less, which saves them $12,600 over the life of the loan or about $420 per year.

In 2017 institutions continued to tighten restrictions on lending, requiring customers to save larger deposits and making it harder for borrowers to take out interest-only loans after crackdowns were implemented by the financial regulators.

But Tribeca Financial’s chief executive officer Ryan Watson urged customers to take stock of their finances in the year and this could mean switching banks to save.

“Unfortunately Australian banks don’t reward loyalty, as a rule they fall ‘out of love’ with their existing clients,” he said.

“Banks take existing clients for granted so the only way to get a competitive rate is to shop around. Banks only respect consumers who do their homework and push for a really competitive rate.”

Mr Turner said owner occupiers should have an interest rate with a three in front and investors should be looking at the low 4 per cent range depending on the size of their loan and whether it is interest only.