Despite all the recent changes to the finance sector and some of the lowest Australian interest rates in history, refinancing still requires some careful consideration. People are often unwilling to start a conversation about changing banks or refinancing, due to the stereotype that it’s simply too hard and time-consuming. One finance expert claims that people are too complacent around their mortgage.
Why are people so complacent?
Changing accounts with any service provider is always seen as a pain, as many of us dismiss such a choice as a long-winded effort to save a few bucks. However, once you have a conversation with your bank, you may find the savings stack up to quite a sizeable sum.
Mortgage finance expert and co-founder of ‘You’re Welcome Finance’, Chris Straw believes: “We always hear the term in the media, "I can help save you," and I think people become complacent to that. It's a matter of when you point out the fact that people are perhaps paying too much, then they all of a sudden prick their ears up to see what they could actually save. It's all about the conversation you can have. I think people have an attitude that changing banks is just too hard or clients are nervous of talking to lenders because they just don't want to go through the process of discussing their financial situation.”
What savings are out there?
The current standard variable rate from major lenders is over 5%, but there are smaller banks out there offering between 3.6 and 3.7. Many people don’t come across these offers as they don’t have access to a branch, and either don’t know where to look or don’t even bother trying.
Chris Straw says: “Absolutely. There's a lack of productivity. I think we see that in all consumer-facing businesses that until you're about to lose that client we take them for granted. I know my own situation, I approached my bank recently to have a look at my loan and they, before I even asked, they said, "Oh, we can trim some rate off of the rate you're paying." So, I think they're just waiting for clients to pick up and say, "Hey, I don't think I'm getting a good deal," or, "I'm leaving you." And then that's when they start becoming a lot more proactive.”
Is it best to work through a broker?
This idea of people not bothering to look for better deals highlights the advantages of using a broker with access to a multitude of different lenders with different deals. Over 50% of new mortgages are written by brokers. In a lot of cases, Chris Straw claims a broker can save you $5,000 or more on a standard $500,000 loan.
He said: “The reality is, we have access to over 40 lenders, so we can look at a client's situation, what are they looking for as far as product needs. But if it's purely about interest rate, we can look to the marketplace and see what the best rate is. Now, obviously, rates move from day to day, from one lender to the next. But it's a case of having a look at what you're paying and if it's competitive already. And we can go to the existing lender and say, "Hey, this client will leave. Can we negotiate a better rate?" Absolutely, we're prepared to do that. So, it's a case of if you're paying way too much, we've got alternatives or options that they can look at.”
Stay tuned for more articles from Real Estate Talk, a trusted source for real estate investors, new and old.