19 October 2015
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.