While the Reserve Bank of Australia became the enemy of many borrowers early last year, hitting mortgage holders with a number of consecutive rate rises before taking a short breather, only to then slug us again in November, the true boogeyman in the closet was the banks.
Just before Christmas they decided to get into the spirit – of bumping up profits that is – and make a move on their own retail rates independent of the RBA. Mind you, while this rather unwelcome gift was widely publicised and just as widely vilified, the fact that it was the icing on an overall 1% increase on top of any official rate rises that the banks slyly snuck in over the course of the previous 24 months went largely unmentioned.
That, however, is exactly what happened. And while the banks blamed their less than generous nature on the increasing cost of funds and tightening margins as a result of the GFC, this pill became pretty hard to swallow when they then posted record profits for the year proceeding the GFC.
The good news is – and don’t we need some right about now? – it’s time for you, the consumer to get your own back! That’s right, the big four are currently not quite as smug as they have been in the past and as such, have started a battle royale to “nab” new business (pardon the banking pun!).
Apart from the forced abolition of exit fees, in the past couple of weeks we’ve seen some exciting things happening amongst lenders…well, about as exciting as it can get when you’re talking about these profiteering corporations!
Firstly and most notably, they have been losing traction in acquiring new applications, primarily for two reasons; number one – they have thus far been reveling in the lack of confidence consumers started to feel in smaller lenders as a result of the GFC which allowed them to pick up a lot of refinances as customers jumped shipped from the little guys.
However as smaller lenders recognised that they had to up the ante and offer compelling and competitive products, and borrowers started to shake off the bad feelings from the GFC, a move back to these smaller institutions saw the big four’s market share start to decline.
Secondly, the well started to run dry when the government’s first home owners grant boost reverted back to its less generous incentive, thereby drastically reducing the number of tenants looking to become property purchasers. The extra cash that the government threw at first homes to help prop up our economy during the GFC saw an escalation in mortgage applications that quickly deteriorated when this scheme ended. Again, leaving the banks scrambling to find new business.
You would think they’d learn their lesson from this change in circumstances and play nice, but of course it takes the big boys in their ivory towers a while to catch on the the fact that we consumers don’t do business with them because we like them, quite simply we have no other alternative!
So when they chose to up interest rates in November, guess what happened? Yes, we became a little disillusioned, then very disgruntled and the complaints from mortgage holders started rolling in.
Combine all of this with the fact that exit fees are now a thing of the past, thus making it easier to switch between lenders, and the banks have gone into overdrive in a bid to not only gain new business, but to retain existing borrowers.
It seems the more we stand up to the bullying ways of the big boys, the more inclined they are to take notice – surprise, surprise! They say money talks and nowhere is this more true than in the world of high finance! With the bank’s fielding more complaints by the day, we are beginning to see additional discounts being offered in an attempt to boost retention figures.
In other words, there is no longer a need to shop around and refinance your existing mortgage to get a better deal. Instead, you can stand up to your current lender and politely tell them you’re not happy with the fact that they’ve stung you with an extra 1% rate rise outside of the RBA over the last two years and you have been doing some shopping around.
With the knowledge that you’ve made some calls to the competition, who have kindly offered to pay your exit fees and give you a much more generous deal, your current bank is likely to appreciate the fact that you were nice enough to call them first to discuss the situation (which you will of course point out), and be inclined to reconsider your existing loan product.
And just how much of an incentive should you be holding out for? Well, here’s a scale of the discounts you can expect to receive off the Standard Variable Rate these days, bearing in mind that the current SVR is running at around 7.84%.
- Aggregated borrowings from $250k – $500k 0.7% off the SVR
- $500K – $600K ~ 0.80%
- $600K – $900K ~ 0.85%
- $900K – $1.5M ~ 0.90%
- $1.5M – $2.0M ~ 0.95%
- $2.0M plus ~ 1.00%
It’s important to note that your enquiry doesn’t go into the credit section and end up at the bottom of a pile somewhere, it’s all done by the retention team. So what are you waiting for? Get on the phone and ask your lender for an “extra” discount and if they won’t give it to you, call us and we’ll get it for you!
About the Author
Since 2008, David Thomas has built a business aimed at servicing the needs of property investors, owner occupiers and small business owners. David is recognised as one of the top 10 independent mortgage brokerages in the country, David and his team have settled almost billions of dollars worth of residential and investment loans over the last decade.
Known for his straightforward, relatable style, David believes by educating people about property funding; they fare better in the market. By sharing his expertise openly, some of the people he educates will likely become his clients. It's a win-win approach.
David Thomas is a credit representative (Representative Number 506153) of BLSSA Pty Ltd, ACN 117 651 760 (Australian Credit Licence 391237).