Kirsty Lamont
New research from comparison site Mozo has found that a whopping 70% of Australians do not trust the big banks, with half of that number losing confidence after their failure to pass on recent rate cuts. One in four big bank customers have left or intend to move to a non-four lender, equating to roughly 4.9 million Australians.
“Australians are making it crystal clear that they are not impressed with the big banks, with 62% saying the big four are putting profits before customers. The days of bank profiteering are well and truly coming to an end with online and smaller banks offering ultra-competitive rates and minimal fees,” says Kirsty Lamont, Mozo Director.
“Mozo’s latest research indicates that there could be a major shift in where Australians choose to do their banking. Online home loan lenders currently hold a paltry 6% of the population but the tide could be turning, with half of Australians saying they would consider making the move.”
The biggest roadblock for online banks appears to be a lack of knowledge, with 38% of Australians saying they didn’t know enough to make the switch, while nearly one in four felt that an online lender offered no special incentives compared to a bank with a branch. Over 30% of Australians felt they needed to sit down with a mortgage expert to discuss their home loan.
“It’s understandable that Australians are exhibiting a level of trepidation regarding applying for a home loan online, given it may well be the largest sum of money they borrow in their life. That said, an online lender can easily save you tens of thousands of dollars over the course of your loan as well as offering the same level of security as any major bank. Our research found that nearly 20% of big four customers felt their money was ‘secure’ with the big four,” says Lamont.
Comparing the most competitive online lender rate against the average big four home loan rate on the market, borrowers could save a whopping $75,000 on a $300k owner-occupier principal and interest loan over a thirty-year period by opting for a competitive online lender.
The big banks sluggish response to the flurry of rate cuts affected the trust of those aged 25-34 years old the most with one in four losing trust after the rate cuts. They were also the age group most likely to move with 46% saying they intended to do so. One in five Australians surveyed admitted they didn’t know enough about the rate cuts to make an informed decision about their banks.
When Australians were quizzed about the benefits of getting a home loan with an online lender instead of a traditional bank, lower interest rates were perceived to be the greatest benefit followed closely by lower fees, however, one in four Australians believe there was no advantage to opting for an online provider.
“Only 19% of Australians believe that the big banks are doing what is necessary to stay afloat in the wake of the rate cuts, leaving a massive 80% unimpressed with big bank behaviour. The writing is on the wall for many borrowers and now is the time to find the most competitive rate on the market and reap the rewards,” says Lamont.
Mozo’s tips for finding the most competitive home loan lender
- Provide your current or potential lender with proof that you can find a better deal by shopping around and comparing rates with different lenders.
- Haggle with your lender for the lowest possible rate. Interest rates may be at an all-time low but this means that competition between the banks is fiercer than ever. Push hard for a good deal.
- Don’t be tempted by an appealing discount. Home loans are about the long game and while a decent discount may save you a lot in the short term, it could work out to be more expensive over the course of decades.
Key points
- 70% of Australians no longer trust the big banks, half of whom lost faith after recent rate cuts
- One in four big bank customers have made the move or intend to leave, equating to 4.9 million Australians
- Online home loan lenders offer the potential to save $75k over 30 years on a $300k loan compared to average big four bank rate