19 October 2015

Portfolio Capital - The Big 4– are they still the right choice

Portfolio Capital - The Big 4– are they still the right choice Portfolio Capital - The Big 4– are they still the right choice Portfolio Capital - The Big 4– are they still the right choice

By David Harris, October 15th, 2015

The latest announcement by Westpac that they are raising all variable rates by 0.2% for both owner occupier and investment loans raises a number of questions around our need for brand loyalty.  Especially when you consider that this increase is on top of the recent larger increases for investor loans. (See my article in last month's newsletter)

As Australia's second largest bank behind the Commonwealth, Westpac have a huge share of the mortgage market which means that a very large portion of the population will be impacted by this decision.  Furthermore, one would be living in a fools' paradise to think that the other three, CBA, NAB and ANZ, will not follow suit.  They may not move at the same rate but rest assured - they will move. 

So, why do we as consumers stay with organisations who clearly look to reap as much as they can from their clients?  Why do we not occasionally cast the net to see just how much could be saved in interest, payments and, most importantly, how much time could be saved off the remaining term of our loans?  As an example, we could save over $57,000 over the life of a 30 year loan or over five years on our mortgage by doing nothing more than changing lenders for a lower rate and maintaining the same payment level as we are currently paying. *

Busy lifestyles with home and work pressures means that we often fail to devote enough time to securing our financial futures to the best advantage, especially when things are going OK.  However, making the time for a quick, and free consultation may well save you a significant amount of money as demonstrated above.

So, why is at again that we stay with the Big 4?  Is it simply inertia, blind loyalty or a feeling of comfort around the branch network?  Let's look at how they compare in services.

Services

Big 4

Non-Major

Full online banking

Yes

Yes

ATM access

Yes

Yes

EFTPOS

Yes

Yes

Offset Account Available

Yes

Yes

Branch Network

Yes

Limited in some cases

Redraw

Yes

Yes

Savings and other accounts

Yes

Yes

Covered under Australia's banking regulations

Yes

Yes**

Current rates ($350K loan):***

4.58% to 4.76%

3.99% to 4.24%

When reviewing the similarities between these lenders it's hard reconcile the need to stay with the big banks.

Of course, there's no guarantee that the smaller lenders won't also take advantage of the "majors'" increases and follow along.  The difference here is that the rates most of these lenders are charging are significantly less than the big four - in some instances more than three quarters of a percent for similar products (and that's after provision of package discounts).

You can easily check your potential savings on our handy calculator at www.portfoliocapital.com.au/calculators/compare-home-loans/ using the rates shown in the table.

If you'd like to take advantage of a free review to see just how much you may be able to save give us a call now on 07 31391372 or email us at info@portfoliocapital.com.au

 

*Based on current example of a 'Big 4' package discount loan of $350,000 at 4.76% and two currently available 2nd tier lender loans with the same or similar features.

** Some 2nd tier lenders are not banks and may be covered under different regulations e.g. Credit Unions and Building Societies.

*** Before application of any announced increases.

Disclaimer:
The information contained in this article is based on the opinion of the writer and facts current at the time of writing.  Interest rates and other features can change from time to time and no responsibility is accepted for future changes of this nature.