Interest in cheaper mortgages has soared in the days since the Reserve Bank’s cash rate cut, as home owners scramble for better bargains.
Susan Castle* has banked with Westpac for the past nine years, but after it announced it wouldn’t pass on the full cut, she decided it was time to break up with the big bank.
“The thing is if others are doing it, why can’t my bank do it? Where is that money going?” she told The New Daily.
Ms Castle’s mortgage is $450,000. Borrowers with Westpac on a $400,000 loan will be $11 a month, or $141 a year worse off because the bank passed on 20 basis points of the 25 points cut by the RBA – a fact not lost on the Sydneysider.
“If you pass it on, it’s showing that you care about clients and customers. There are all these ads about caring about you, but they can’t show it?”
She is one of the tens of thousands of Australians who have taken up the Treasurer’s advice to “shop around and get the best possible deal”, with the hope of saving thousands on their home loan.
Traffic to home loan deals on Finder jumped by a staggering 654 per cent in less than 48 hours after the announcement.
Other sites such as Rate City recorded a 773.5 per cent increase, Canstar saw a 303 per cent surge in traffic and Mozo said ‘tens of thousands’ of people have visited their home loan page in the past few days.
Graham Cooke, insights manager at Finder, said the surge shows that people are becoming increasingly savvy with their finances.
“It’s great to see Aussies being proactive and looking for better value,” Mr Cooke said.
“This historically low rate will open lots of eyes to just how good the current offers are – and that’s the case for variable and fixed rates, alike.”
Kirsty Lamont, director at Mozo, said they noticed a trend even before the announcement.
“We’ve seen a huge spike in interest from the start of this week, even before the Reserve Bank cut the rates. Interest has really been building over the last week or so,” Ms Lamont said.
The increase in activity on comparison sites also marks a move away from the big four banks, she said.
“I think many big bank customers are sick of their bad behaviours, and for ANZ and Westpac to not pass on the full amount, it’s really the last straw for a lot of customers,” Ms Lamont said.
“People have not been aware of the alternatives, whereas an event like this, it stimulates people into action to look at other options. We’re seeing a huge shift to smaller lenders who are a lot more competitive.”
The real message is to be assertive, says Canstar executive Steve Mickenbecker.
“You can either sit back and wait for the banks to move again under another cut and hope they pass on the full rate, or you can do something,” Mr Mickenbecker said.
“If you sit back and wait, chances are you’ll still be paying a higher amount. Even before the RBA announcement, there was a 0.79 [points] difference between the rate that most consumers are on and the best rate their banks provide.”
Getting the best deal
Home owners searching for the best deal need to consider what’s right for them, said Mike Felton, CEO of the Mortgage and Finance Association of Australia.
“Not every customer will get the bottom rate, it’s about getting an appropriate rate for their circumstance,” he said.
“There are fees and charges, and you really do need to be looking at the package to ensure the features of the loan meet the customer’s needs and objectives.”
Savvy shoppers need to be forward-thinking about their future, said mortgage broker Louise Lucas.
“People often don’t have long-term views. You need a view that’s not just about getting the cheapest rates for the next year, because that can cost you in the long run,” Ms Lucas said.
“The best rates are for fixed rates, [but] if they’re going to have a change in their circumstances it might cost them, even more, to break it later.”
*Name changed at source’s request