Loyalty to Your Bank is Costing Heaps
Your bank might give you the impression that you’re getting a good deal by sticking with them, but your loyalty could actually be costing you money.
Customers who stay with their childhood bank, or the same bank their parents use, could be losing thousands of dollars a year to unfavourable home loan interest rates. This is according to Heart Mortgage Services. The Australian home loan market is fiercely competitive right now, and many customers stand to save significantly by refinancing.
Failing to switch, failing to save
Almost a quarter of Aussies still hold their mortgage with the same bank they used as a child or their parents’ bank, the research shows. This adversity to switching could be adding tens of thousands of dollars to the lifetime cost of the loan.
These loyal owner-occupiers are paying 4.7% interest on average, compared to an average of 3.9% among customers who have moved to a different lender.
It’s a similar picture for investors; those who have never switched pay 4.9% interest on average, compared with 4.3% for those who have.
“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,’’ said Heart Mortgage Services Amanda Varidel.
“It 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.”
Pick and choose
Mrs Varidel also cautioned against holding your home loan and savings account with the same bank. Usually customers can find better deals by taking out different products with multiple financial institutions.Crackdowns on lending in 2017 have made things harder for consumers, meaning they face tighter restrictions and need to save larger deposits for their homes. Even so, there is no harm in considering your refinancing options to see if you could get a better deal.
“Unfortunately Australian banks don’t reward loyalty, as a rule they fall ‘out of love’ with their existing clients,” she 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.”
In the current market with all-time low interest rates, owner occupiers should be aiming for an interest rate below 3.9%. Investors, depending on the size and type of their loan, should find a competitive rate in the low 4% range.
You might start your search for a more competitive home loan, but a mortgage broker’s insider knowledge will help ensure you’re really getting the best deal. If you have multiple loans eating into your finances, you might consider refinancing to consolidate everything into one product. Speak to your financial adviser to discuss this if you feel like your debt is getting out of hand.
Home owners who have their home loan with their childhood bank or the bank their parents use pay on average 60 basis points more in interest than those who have switched lenders.
Refinancing could save you many tens of thousands of dollars over the life of your home loan.
Call us today on 1300 861 143 and we can help you find the best deal on the market.
This information is current as at 19/03/18. This article has been prepared by Heart1Stop, a social media brand owned by Heart Mortgage Services and Heart Financial Advisers. The information contained in this article is an overview or summary only and it should not be considered a comprehensive statement on any matter nor relied upon as such. The views expressed here are not those of Heart1stop, Heart Mortgage Services, Heart Financial Advisers, shareholders, directors or staff and associated contractors and business associates. This article has been prepared without taking into account any person’s objectives, financial situation or needs. Because of this, you should, before acting on any information contained in this article, consider its appropriateness, having regard to your objectives, financial situation or needs. Any taxation information contained in this article is a general statement and should only be used as a guide. It does not constitute taxation advice and is based on current laws and their interpretation. Each individual’s situation may differ, and you should seek independent professional taxation advice on any taxation matters. While the information contained in this article may contain or be based on information obtained from sources believed to be reliable, it may not have been independently verified. Where information contained in this publication contains material provided directly by third parties it is given in good faith and has been derived from sources believed to be accurate at its issue date. It is not the intention of Heart1Stop or Heart Mortgage Services and Heart Financial Advisers that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. To the maximum extent permitted by law: no guarantee, representation or warranty is given that any information or advice in this publication is complete, accurate, up to date or fit for any purpose; and no party of Heart1Stop or associated entities as mentioned is in any way liable to you (including for negligence) in respect of any reliance upon such information. This article may also contain links to websites operated by third parties ("Third Parties") who are not related to Heart1Stop. These links are provided for convenience only and do not represent any endorsement or approval by us.