Bor­row­ers let banks off hook on rate cuts

The big banks don’t al­ways of­fer the cheap­est deals on mort­gages, writes So­phie Elsworth

Mercury (Hobart) - - NEWS -

JUST one in 150 home loan cus­tomers bother to phone up their bank and de­mand a bet­ter deal, it can be re­vealed.

De­spite dozens of lenders fail­ing to pass on last month’s cash rate cut in full, mul­ti­ple bank­ing sources have told News Corp how few cus­tomers took them to task on why they didn’t re­ceive the full rate cut.

The Re­serve Bank of Aus­tralia board cut the cash rate to 0.75 per cent last month. It is not ex­pected to drop fur­ther when the board meets to­mor­row.

Mort­gage Choice bro­ker James Al­gar said once bor­row­ers had se­cured their home loan they “lose in­ter­est and the banks take ad­van­tage of that”.

“We reg­u­larly see bor­row­ers with rates around 4.8, 4.9 and in the fives on owner oc­cu­pier prin­ci­pal and in­ter­est loans.”

Mr Al­gar said in many in­stances he was able to take off at least 1 per­cent­age point on a bor­rower’s home loan rate.

Data from fi­nan­cial com­par­i­son site RateCity shows on vari­able home loans the cheap­est deals start at 2.74 per cent.

The big four banks passed on be­tween 0.55 and 0.59 per­cent­age point drops of the 0.75 point cuts this year.

‘We are now pay­ing $90 less per week than we were’ For­mer NAB cus­tomer Sim­mone Le Raye

SAVVY bor­row­ers who are on the look­out for bet­ter mort­gage deals are turn­ing to smaller lenders to save money.

Aus­tralia’s cus­tomer-owned bank­ing sec­tor’s por­tion of hous­ing loans climbed by 7.8 per cent in the 12 months to June, in con­trast to the ma­jor banks, whose share grew by just 2.6 per cent.

How­ever, the big four banks still dom­i­nate, hold­ing 82.1 per cent of all hous­ing loans in June, ac­cord­ing to bank­ing reg­u­la­tor data. Cus­tomer-owned banks, such as credit unions, held 5.4 per cent and other lenders had 12.5 per cent.

A spot­light was put on the big four banks last month when they failed to pass on the Re­serve Bank of Aus­tralia’s 0.25 per cent cash rate cut in full. The big four lenders – the Com­mon­wealth Bank, West­pac, ANZ and NAB – passed on cuts be­tween 0.13 and 0.15 per­cent­age points.

Sim­mone Le Raye, 39, is among those who have opted to try smaller banks. This year she re­fi­nanced her three-bed­room home, switch­ing her mort­gage from NAB to lender ME.

Pay­ing an ex­or­bi­tant in­ter­est rate of 4.76 per cent, she said to her hus­band Michael, “Let’s get away from the big four banks and look else­where”.

“We went from pay­ing 4.76 per cent down to a three-year fixed rate of 3.73 per cent,” Mrs Le Raye said. “We are now pay­ing $90 less per week than when we were with NAB.”

The pair con­sol­i­dated their credit card debt into their mort­gage and also pur­chased new fur­ni­ture, tak­ing out a loan of $260,000. Their re­pay­ments fell to $270 per week.

Fed­eral Trea­surer Josh Fry­den­berg last month or­dered the con­sumer watch­dog, the Aus­tralian Com­pe­ti­tion and Con­sumer Com­mis­sion, to in­ves­ti­gate the big banks’ re­fusal to pass on the re­cent spate of in­ter­est rate cuts in full.

The Cus­tomer Owned Bank­ing As­so­ci­a­tion’s di­rec­tor of strat­egy, Sally Macken­zie, said the fi­nan­cial ser­vices royal com­mis­sion had “high­lighted the ben­e­fit to look around at other providers in the mar­ket”.

“There are some re­ally good al­ter­na­tives out there in the mar­ket if peo­ple look be­yond the big four,” she said.

Canstar found, on a $300,000

30-year home loan, the av­er­age vari­able rate for the big four banks was 4.01 per cent, com­pared with 3.82 per cent for the rest of the mar­ket.

For a bor­rower pay­ing 4.01 per cent, their monthly re­pay­ments would be $1434 com­pared with those on 3.82 per cent pay­ing $1401. It’s a sav­ing of $11,770 over the life of the loan.

Mort­gage Choice bro­ker Scott Ba­ment said he was writ­ing a lot of loans with smaller lenders.

“I think the big four banks have lost a lot of trust,” he said. “Cus­tomers are more than happy to look at other in­sti­tu­tions.”

Mr Ba­ment said owner-oc­cu­pier bor­row­ers pay­ing prin­ci­pal and in­ter­est should be look­ing for rates “in the very low threes”.

Newspapers in English

Newspapers from Australia

© PressReader. All rights reserved.