For those who haven't seen in the last week Westpac, ANZ and CBA have increased rates across all variable loans by a minimum of 0.14%, hitting the pockets of owner occupiers and investors alike. For the average Perth home owner, that’s an extra $774 annually.
Unfortunately, these will not be the only banks to move. A few small lenders have already taken the plunge, and we don't imagine NAB being too far behind as when one goes the others generally follow.
To avoid the jargon mentioned in media, the sudden change is to maintain profitability. Their costs have gone up and so they are passing the burden onto their customers. Can you imagine if Coles or Harvey Norman did that? The costs of running all businesses have increased, yet banks are one of the only industries where it is acceptable to pass that cost on.
Wondering why? It’s not the lack of competition, as there are a vast number of lenders offering thousands of options significantly cheaper than the majors. Unfortunately, the reason is our reluctance to make a change when it’s required. Banks know that the majority of customers are sticky and reluctant to move and so they rely on this fact to pass on their increased costs in order to maintain profits.
I know that home loans are not the most exciting of things and that people think it’s going to be costly or hard work to change but that extra $774 you are now paying to the banks to cover their costs could be sitting in your pocket reducing your costs. Wouldn’t it be great to pay your home loan off sooner?
As a mortgage broker I’m an expert in refinancing and it’s not as hard or as daunting as you may think. In the current market, I encourage everyone to speak to a broker and make the banks do better. Let’s make them be more competitive for your business.