Breaking up isn’t that hard to do

Welcome to a new year – hopefully a happier new year

During the Christmas holidays, I started going through a break-up. Apparently, break-ups are common this time of year, mostly because we have more time to reflect on what we do and don’t want in our lives.

So, I decided to break-up with my loan provider. It was our Best of the Best issue (December 2020) that inspired me to make a change and I hope it has inspired you, too.

Until recently, I was one of those people who stick with the same providers, regardless of rates and service, because I thought it would involve too much hard work to do otherwise. I’m not alone – despite a third of mortgage holders being dissatisfied with their current bank, few make the switch, according to a 2019 Deloitte Access Economics survey.

This is where Money’s Best of the Best issue can help. It provides a comprehensive list of top providers, best-value providers and many other categories of financial products and utilities to take the pain out of decision-making.

When it comes to banks, I continue to be astounded that they don’t reward loyalty in customers – once they have enticed you with low rates and cashback offers and you are an established customer you’re no longer their target. They will not offer you reduced rates (unless you ask) and won’t match rates they offer new customers.

The good news is that when it comes to loans, you don’t even have to do the ring-around yourself. Mortgage providers will make the calls for you and match you up with the best providers to suit your requirements. Couldn’t be easier. This is precisely how mortgage brokers manage to eke out a living. By building relationships with banks, they can access preferential pricing for customers and are paid a commission by the banks for any customers they deliver.

Making a profit is the aim of any business, and that includes lenders. But is your lender making the best decisions for you?

Late last year the Australian Competition & Consumer Commission (ACCC) found that borrowers with modest mortgages could save tens of thousands of dollars over the life of their loan if they refinanced at the interest rates offered to new customers (almost 0.6% points lower on average).

According to the ACCC, a borrower with a home loan of $250,000 could save more than $1400 in interest in the first year, by switching to the average interest rate paid for new loans. Over the remaining term of the loan, that borrower could save more than $17,000 in interest.

The reason for my recent break-up? I have been with my bank since I took out my first loan 25 years ago. I was happy with the service and the products but felt it was time for my loyalty to be rewarded. As that isn’t part of the service promise, I decided to move on.

A couple of phone calls later, and my mortgage broker had found better deals and cashback offers, along with all the services provided by my original bank. It’s a significantly better deal and I’m furious that my former lender didn’t offer me, their long-term customer, the better rate or the decent cashback offers enjoyed by new customers.

This is a problem that exists beyond the banking system. As a society, we tend to focus on short-term goals. A perfect example is politicians thinking only as far as the next election.

Covid-19 has created a shift in this area, with many people now recognising the value of environmental, social and governance issues – which are long-term by nature. Long may this trend continue.