In response to APRA’s requirement that they all hold greater levels of cash reserves from July next year, the Big 4 have all increased their standard variable home loan rates by up to 20 basis points. Predictably there has been much indignation in the media and on the airwaves – so why don’t you switch your home loan to a cheaper deal. After all, it’s not hard to switch mortgages.
The fact is, though, that we simply don’t do it. According to APRA statistics, the Big 4 hold well over 80 % of all home loans in Australia. For some borrowers that’s because they are getting a fantastic deal from one of the Big 4 (don’t forget, the big banks do offer excellent home loan rates for those who are prepared to negotiate). For other borrowers, though, it’s simply because they have shopped around and, even if they have, they can’t be bothered moving.
Why don’t we switch our home loans?
It’s not that some of us don’t want to switch. According to Canstar Blue research conducted earlier this year, 1 in 5 of the more than 3,500 survey respondents admitted that they would like to switch banks – it just doesn’t seem to happen though.
It may be the entanglement, with 77% of survey respondents admitting that they are more likely to take out financial products (e.g. loans, credit cards, savings accounts) with the institution they usually bank with. It may also be stress – with 37% of survey respondents admitting that they find dealing with money stressful and overwhelming.
Switching home loans isn’t difficult
There are 100 home loan lenders available to compare on Canstar’s database and more than 1,300 home loan products – you can make a shortlist of what’s on offer during your morning tea break!
Make sure that you:
- Check what application fees apply
- Check any ongoing fees
- Get a copy of your credit rating
- Check whether you’ll need to pay mortgage insurance if you switch (if you have less than 20% equity in your home)
- Check whether there are any break fees associated with your existing home loan
- Use our Home Loan Comparison Calculator to help work out the best deal.
Done all that? You’re halfway there.
Negotiate with your existing lender
Before you switch home loans, give you existing lender a call and let them know what interest rate you can get elsewhere. Ask them if they can match it. Ask them if they can even come close.
If not – the switch is up to you.
A radio interview I did recently with 702 ABC Sydney took a number of calls from Australians that had recently switched home loans – and each one of them said how easy the process was!
Caller Lucy said it was easy to make the switch through her local mortgage broker. Caller Craig said he was gobsmacked at how easy the switch was and how good the new bank is, noting it is one of the Big 4 – as I said, the Big 4 do have some good rates!
And caller Jim said his switch from one of the big four to a smaller bank was seamless, noting he did not hear from the former bank even once during the process.
So – what are you waiting for??
Find out more about how to switch home loans.