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Bank gimmicks fail to win new customers

July 03, 2011

A new report from Loan Market reveals that, in spite of the Big Four banks offering everything from cash incentives to paying competitors’ exit fees, the mortgagees of Australia are largely reluctant to change lenders in their search for the best mortgage. Loan Market CEO Dean Rushton has this to say on the situation:

Were you surprised by the figures indicating only 11 percent of brokers have seen a significant increase in refinancing activity since the onset of the banks' home loan price war?

It is somewhat surprising. We were expecting a greater percentage of activity off the back of the major bank’s promotions in particular. However, I suspect that outside of the initial switching amount, the new loan rates weren’t compelling enough for homeowners to move.

Why do you think people are reluctant to jump ship in spite of the incentives?

Surveys we’ve run in the past have shown that customers are looking for significant savings before they will go through the paperwork and administration to change lenders. Consumers were looking for $1500 to $2000 in annual savings as a minimum.

Do you expect the banks to ramp up these sorts of activities to lure new business?

There’s no question we will continue to see new promotions in the coming months as banks look for greater volumes in a soft market. I’d expect that the new promotions will focus more on straightforward rate offerings or discounts for specific customer groups. There are genuine opportunities in the market today, dependent on your current rate and position and I’d expect this situation to only get better.

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