According to the recent findings of a Queensland University of Technology (QUT) study, Australians are allowing apathy to cost us $11.6 billion every year.
Dubbed the ‘lazy tax’, this massive overspend is apparently the result of our ‘set and forget’ mentality (seemingly pervasive in the Aussie ‘she’ll be right mate’ culture) when it comes to financial management.
This includes budgeting the weekly grocery shop and importantly, evaluating whether you’re really getting the best deal from your bank when it comes to things like savings accounts and of course, home loans.
The research indicated that although 50 per cent of us had given serious consideration to switching essential service providers, only 25 per cent had actually done anything about it. That’s half of half.
Not really a great record when you consider how critical it is to save money and shore up cashflow in this new financial age, if you hope to continue purchasing property on credit!
Savings too good to ignore
According to the QUT report, consumers who shopped around for a better deal managed to save more than $2.5 billion combined.
Not surprisingly, the most generous savings were enjoyed by those souls brave enough to refinance home loans, consolidating the impressive sum of $649 million.
Generally it appears to be inner city households with above average incomes that are willing to make the move from one financial institution to another.
Report authors suggest the current financial climate and ongoing memories of a nasty GFC (particularly for people with their own businesses and/or significant real estate holdings) have shown we need to be more pro-active when it comes to money management.
However, while some of us are compelled to shop around and seek a better deal, too many Australians continue wearing outdated financial products like a favourite, worn out pair of thongs.
Why are some reluctant to switch?
There are numerous reasons people hesitate or simply don’t consider the option of switching service providers, particularly when it comes to things like home loans and credit cards.
Given how much money you stand to save by exploring your options and moving to a better product, you’d think all mortgage holders would review their financial affairs with greater frequency.
Generally though, it’s only when we perceive something to be costing us more in an overt way that we might make a reactionary move.
Westpac’s recent announcement of a 0.20 per cent rate rise across all of their variable mortgages is a prefect example. No doubt many Westpac customers (myself included) instantly considered jumping ship at this news.
But the reality is, all of the Big 4 will follow suit at some stage in the near future…announcing their own upward rates adjustment across most or all variable products, whilst blaming industry ‘bully’ APRA’s July 2016 regulatory changes.
Interestingly, the QUT study found the biggest barrier to switching was the perceived effort involved, with 37 per cent of respondents reluctant to commit the time and energy into ‘shopping around’.
Another 36 per cent voiced concerns as to the possible cost of changing something like a home loan, while 14 per cent based their decision to sit instead of switch on the perception that customers receive preferential treatment with their current provider.
Thirteen per cent of people felt they didn’t have sufficient information on the alternatives to look elsewhere for a mortgage, while another 13 per cent felt it was all the same excrement in different buckets essentially, so why bother?
And while almost a third of us are happy to switch electricity retailers (29 per cent), only 18 per cent will consider changing lenders. Even though 83 per cent of survey participants said they’d happily switch their home loan if it meant saving $3,000 a year. Okay…who wouldn’t? That’s a massive interest saving over twenty odd years!
Mortgage brokers make switching a breeze
What I find fascinating about studies like this is how seemingly indoctrinated humans tend to become in a prevailing cultural mentality that’s passed down through generations of experience.
It’s never been easier than it is today to switch mortgage providers. Yet so many of us are still reluctant to ‘go there’, for fear of having to deal with banking bureaucrats and getting bogged down in hours of a little game I like to call ‘compare the product’…and don’t forget the fine print.
While changing to a more optimal mortgage product and provider can seem like a monumentally time consuming task, here in the twenty first century we have something called a ‘mortgage broker’, whose job it is to match clients with the best possible loan product based on their individual needs, every day.
This particular genus of the property and finance species has extensive experience in the financial sector, along with vast networks among their respective provider panels. Meaning their finger is always on the pulse and their knowledge of products always up to the minute.
QUT’s Dr Juliana Silva-Goncalves, who surveyed a representative sample of 1000 Australians, said the message for consumers is that if they switch to a more efficient provider, with a service more adequate to their needs at a lower cost, they can save a “substantial amount of money.”
“It’s interesting to see apathy as the key barrier to switching across such a wide range of industries. The belief that it’s too hard to switch and too costly, is stopping households from saving thousands of dollars.”
So what’s stopping you? With the warmer weather upon us and bees-a-buzzing, there’s no better time to consider some spring cleaning of your financial portfolio than right now.
If you haven’t recently evaluated your home loan product(s) to ensure optimal cashflow for your investment portfolio, click here to connect with the Trilogy team and we can arrange to do the ‘shopping around’ for you!