IT is known fact that many women love their brands. From the bras they wear to the laundry powder, when it comes to shopping, there are a lot of women in Australia who stick to the brands they know and trust.
Take mortgages for instance. Did you know that there are four banks that hold about 83 per cent of all owner-occupier mortgages in Australia (according to July data from the Australian Prudential Regulation Authority)? Westpac held the greatest share of home loans with 27 perc ent, followed by the Commonwealth Bank with about 25 per cent.
Sure, it can be convenient to take out a mortgage with the company you already bank with. After all, they already have your personal details and bank records so you’d think it would be easier than shopping around. And because you’re already a customer, you’d expect to be looked after right? Perhaps with a loyalty discount or some sort of incentive?
It’s true that the major banks — that is ANZ, Commonwealth Bank, NAB and Westpac — offer packaged discounts to their customers who “bundle” their home loan with several other products such as a transaction account and a credit card. Often some fees are reduced or waived and ongoing fees are bundled together into the one annual fee.
So there’s a lot going for major banks that can offer you a discount and if you’re already a customer, it saves you from potentially moving your accounts over to another financial institution or time spent on shopping around for a home loan.
But there’s one major incentive for taking some time to compare home loans before signing up to your current financial institution. And that is potentially a significant saving.
For instance, let’s compare the benchmark basic variable rate, which is the average rate of the major four banks, and the best rate offered on RateCity. The benchmark rate is currently 6.78 per cent and the best rate for a $300,000 mortgage is 6.55 per cent by Match Home Loans. That’s a difference of 0.23 percentage points and is a saving of about $43 per month. After 25 years, that could potentially result in almost $13,000 saved in interest charges.
In the above example, the basic rates were used because they are generally the lowest rates that lenders offer. They may not have all of the features or services available such as 100 per cent mortgage offset or loan portability. But if you don’t need all the bells and whistles that the more expensive mortgages offer, then it’s worth choosing a basic loan with a better interest rate.
Don’t let your bank talk you into a home loan package without shopping around first. And with the convenience of comparison websites, such as RateCity, you won’t need to jump from one lender’s website to the next looking for their best deals. It’s also worth taking your results to your bank to see if they can match a competitor’s offer.
Brand loyalty is big business in Australia and it’s obvious that the major banks are as big as they are as a result. Because if more borrowers shopped around for mortgage lenders, they would soon realise that savings can be more useful than loyalty.
Michelle Hutchison is Consumer Advocate at RateCity.
The above information is general only and does not take into account your objectives, financial situation or needs.
