Bank switching set to soar as inquiry rolls on
As appeared in the Mercury Talking Point, November 6, 2018
Owning your home, or more specifically paying off your mortgage, is the biggest single expense of most Australian families’ budgets.
And research shows that many Tasmanians and Australians move home every five to six years.
But do we move our loans? Or do we look for better deals, as in interest rates and loan packages with either our existing bank/lender of another institution.
Anecdotally, the answer is traditionally a resounding: “No!”
But new Customer Owned Banking Association data shows that because of the ongoing Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, one in three Australians are thinking of changing their banks … and to date 8% have already done so.
A leading financial commentator said only last week: “if you don’t have a 3 in front of your mortgage rate, you need to change your home loan.”
For many of us still, we have gone down the set and forget pathway. We got our first mortgage and even if we move home, we have kept it.
But consider this. A loan of $350,000 repaid with monthly instalments ($1,669) over 30 years with an interest rate of 3.99% will see a home-owner pay a total of $600,817 over the lifetime of the loan.
So if you can negotiate just a point or two down on that it can save you a lot of money over 30 years, money you can use in your later years.
In the past 12 months, 20% of new housing loans in Tasmania were approved for the refinancing of an existing owner occupied housing loan. This compares to 24% for Australia which shows that Tasmanians are not being as active in ensuring they are getting a great deal.
I would advise all Tasmanians, whether they are buying a new home or not, to look at their mortgage rate … give yourself a financial health check.
The market does change and when you first took out your loan, it might have been competitive then – but not today.
And if you want to change banks, remember this: the lender you are moving to will assist you … and the bank you are leaving is now, by law, expected to help you.
Look at the other features your bank can attach to your loan. Is your loan attached to a fee free transaction account?
Can you change your repayment schedule from monthly to fortnightly or even weekly?
They may only be small changes, but over 30 years, they can make a big difference … even if you’re 10, 15, 20 years into your loan.
In the Australian banking industry there’s a major change coming in relation to Consumer Data Rights.
Consumer Data Rights, or more specifically, Open Banking, will make banking even easier. It will give small business and individuals greater control over their banking information, more choice in their banking, greater ability to manage their money and more confidence in the use and value of their data.
Ultimately, it will remove the barrier of: “It’s just too hard to switch banks.” Open Banking will become law for the major banks in July 2019 and for all other banks 12 months after that.
Earlier this year, the New Payments Platform was launched - the advanced payments infrastructure that has been built by the Australian banking industry and enables cash to be transferred between accounts at different financial institutions instantly.
Now customers can add a PayID to their account - like a mobile number or email address – so they don’t need to remember their BSB and account number.
The advantage of a PayID is the ability to move it between accounts, and in effect, bring any payments linked to it, along with it.
At Bank of us, we are seeing more new customers as the Royal Commission continues.
But whoever you bank with, ask yourself this…
What is in it for me to switch? Can I save money? Will I have a better customer experience? Will I have more control over my finances?
If the answer to any of these questions is yes, perhaps it’s time to consider your home loan and what it’s doing for you.