Loyalty is a good thing but when it comes to mortgage customers, they could be putting their money to waste by sticking with their banks.
Citing a study from Uno, News Corp Australia Network said around 20% of mortgage customers have their loan with the same bank they had in their young age, or with the same financial institution as their parents.
Uno CEO Vincent Turner said loyal owner occupier customers have an average interest rate of 4.5%, while those who are not only have to pay an average of 4.3%.
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Disloyal property investors were also in a better position than loyal investors as they only had to pay 4.6%, with the latter bearing an interest rate of 4.8%.
"A home loan is one of the biggest financial decisions most people will ever make so it’s important to review the entire landscape of options to ensure you’re getting the best deal,’’ Turner explained.
Turner observed that oftentimes, customers have their savings and loans with the same bank. He suggested detaching these two things and carefully choosing the best deal possible from multiple financial institutions.
According to UNO, for a $300,000 30-year owner-occupier loan, disloyal customers have to settle an interest rate of 20 basis points less, saving them $420 a year – or $12,600 over the life of the loan.
Tribeca Financial CEO Ryan Watson, therefore, urged customers to consider switching banks to save as these financial institutions do not really reward loyalty.
"Banks take existing clients for granted so the only way to get a competitive rate is to shop around. Banks only respect consumers who do their homework and push for a really competitive rate," he said.