(03) 9020 2905Bruce Brammall, The West Australian, 6 June, 2022
Loyalty. A quality most agree is admirable. Something that, given over long periods, should be rewarded. A loyal person deserves to feel valued.
Often yes, but not always. Life is never that straight, nor fair.
Loyalty can, sadly, resemble being tied to an anchor. You attach yourself to it. It pulls you under.
Too often, what you show loyalty to does not deserve it.
Top of that list? Australian lending institutions (ie, banks).
The more “blind” loyalty a customer shows them, the less banks respect or reward them, the less love they show, the more they snigger behind their back by charging them higher and higher relative rates.
How so?
Because banks have never rewarded a customer, ever, for loyalty alone. They have never gone to a customer they’ve had for five or more years and said “Hey, we appreciate that you’ve been great with your mortgage, so here’s a bigger interest rate discount”.
Banks focus on getting new business. They assume/hope that once there, inertia will set in.
Occasionally, the “retention” team needs to offer a sweeter deal to those who threaten to leave.
Cash back deals
Every few years, banks go crazy with “cash back” deals. We’re there again.
If you search for “refinance deals”, you’ll find lenders offering up to $5000 to refinance to them. More is potentially on offer for those with multiple loans, or are prepared to bring your home loan along with a new investment property.
Plus a pretty sharp interest rate.
Banks are effectively out there buying clients from each other – great for customers who are prepared to walk to a new home.
But changing is hard
Yep, I get it. Life gets complicated. All the paperwork to move banks. Changing all the direct debits/credits set up for a thousand different institutions is hard.
You shouldn’t have to change banks. And if you don’t want to, you’re going to have to whinge.
If you’ve got a mortgage broker, speak to them. They can usually do something. After all, if the request to “sharpen the pencil” comes from a broker, the bank knows the broker will walk the customer across the road, because that’s what they do.
If you don’t, you’ve got to threaten your bank … credibly.
Call them and ask for a “payout figure” for you loan/s. Soon after, you should hear from someone in the bank’s retention team. They will generally offer you a better rate.
If they don’t, or if the rate still isn’t very sharp, well, you’ve given them fair warning. If you know you can get a much better rate elsewhere, time to get yourself a good broker.
Bank behaving badly
One major bank new tactic is particularly poor and frustrating.
If you call and request a better rate, they will give you a small additional discount. They have plenty more in their pocket, but they hope that will pacify most.
If it doesn’t, you or your broker do the applications to move your mortgage elsewhere. At some point, your “new” bank sends your current bank “mortgage discharge” forms.
It’s not until this point that your current bank’s retention team calls and offers you what they should have offered you initially. Then they offer you an extra $2000 simply to stay!
Why make you do all that work when they could have kept you happy by offering you a proper discount in the first place? That’s not “respecting” loyal customers.
Which bank?
Hmm.
Banks reward whingers
Bank customers (by that, I mean anyone with a mortgage), will only ever get a better rate on their loans by going on the front foot and being aggressive. Whinging, threatening to leave, or actually leaving.
If you’re not occasionally being a “squeaky wheel”, you will never get a thing. Ever. Guaranteed.
An example? When I got my first loan in 2000, I got a “special” discount of 0.6 per cent. If I hadn’t gone back and regularly whinged, my current home loan interest rate would be more than 4 per cent, instead of mid-2s. My “discount” is north of 2 per cent.
Hit ‘em hard, now
Banks are acting crazy stuff to win or retain clients. There has never been a better time to tell your bank that if they want your continued loyalty, they need to get all Jerry Maguire with you.
“Show me the money!” Right. Now.
Bruce Brammall is the author of Mortgages Made Easy and is both a financial adviser and mortgage broker. E: bruce@brucebrammallfinancial.com.au.