Bank loyalty costing customers

LOYALTY to the big four banks is costing customers as their standard variable home loan interest rates remain higher than the rest of the market.

Customers of the major four banks could be losing out by staying loyal. Picture: AAP Image/Joel Carrett.

LOYALTY to the big four banks is costing customers as their standard variable home loan interest rates remain higher than the rest of the market.

The nation’s largest lenders have all hiked their interest rates in the past 12 months — despite the Reserve Bank of Australia slashing the cash rate by 25 basis points last May — and experts are strongly tipping another rate cut today. (TUES)

New analysis by financial comparison website Finder.com.au found the average standard variable rate of the big four banks is 5.61 per cent while the average SVR for the overall market is 5.21 per cent.

There are strong predictions RBA governor Glenn Stevens could cut the cash rate to 1.75 per cent.

This means customers could be forking out an extra $75 per month or about $1500 per year by banking with the big four.

The site’s spokeswoman Bessie Hassan urged borrowers to consider banking with lenders other than the nation’s biggest to secure a more competitive deal.

“Smaller lenders are pushing hard to compete with the big banks and now is the time for borrowers to consider giving the little guys a go,’’ she said.

“It’s worth doing your research online and comparing deals before jumping into a mortgage because there’s a significant difference between what lenders are offering.”

Borrowers should look around for a more competitive home loan deal.

The banks have argued their cost of funding has risen with increased capital requirements imposed on them by the financial regulator, the Australian Securities and Investments Commission, prompting them not to pass on rate cuts in full and make out-of-cycle hikes in the past year.

The Australian Securities Exchange’s RBA rate indicator which bases its forecasts on market expectations predicted on Friday a 58 per cent chance of a cash rate cut from two per cent.

However if there is a fall lenders may not pass it on to borrowers.

Inflation figures released this week showed the year-on-year rate is 1.55 per cent and is well below the central bank’s target band of between two and three per cent.

But Mortgage Choice spokeswoman Jessica Darnbrough said borrowers should push for more competitive deals because banks are hungrier than ever for new business.

“Many borrowers are given additional discounts, which ensures their home loan rate is considerably lower than the banks’ advertised standard variable rate,’’ she said.

“We definitely encourage borrowers to shop around and look beyond the big four banks.”

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The home loan market is more competitive than ever before and customers are being urged to shop around for better deals.

HOW THE BIG BANKS COMPARE ON OWNER OCCUPIER LOANS

Bank April 2015 April 2016

ANZ 5.63% 5.56%

CBA 5.65% 5.6%

NAB 5.63% 5.6%

Westpac 5.7% 5.68%

Average market SVR 5.21% 5.54%

Source: finder.com.au

Originally published as Bank loyalty costing customers