March 3, 2011
With the home loan market heating up, the banking war can mean big savings for your home loan and other financial products.
When the Commonwealth Bank of Australia (CBA) raised its variable rate by 45 basis points in November last year, nearly double the Reserve Bank of Australia’s (RBA) cash rate, the bank received an angry backlash.
Its reasoning – to slow mortgage growth during the GFC – fell on deaf ears as customers either left the bank or ignored it completely as an option.
According to Australian Prudential Regulation Authority (APRA) data, CBA suffered, recording the largest drop in market share of 0.83 percent in the 12 months to December 2010. In the same time period Westpac grew its market share by 8.24 percent.
But the CBA is back in the game, announcing a new strategy to grow its mortgage book by 8 to 9 percent.
Meanwhile, NAB has started an attack on the other big banks with an advertising campaign focused at the bank “breaking up” with Westpac, CBA the game, announcing a new strategy to grow its mortgage book by 8 to 9 percent.and ANZ.
The clear signals are for an all out war
So what does the banking war mean for you? Banks are more willing to negotiate and offer extra incentives. For example, NAB currently has an offer to pay the $700 exit fee for customers who switch their loans from Westpac or the CBA to NAB. But with exit fees to be abolished for new loans from July 1 and the offer is for a limited time, this is a short-term incentive.
Comparing the standard variable interest rate for home loans between the big four reveals a difference of 0.19 percent. The lowest, offered by NAB, is 7.67 percent. Westpac currently has the highest standard variable rate at 7.86 percent, followed by CBA at 7.81 percent and ANZ at 7.80 percent.
But before you rush off to sign the papers for a new home loan with a bank with the lowest interest rate, remember to compare not only interest rates but other features of the home loan as well.
For example, annual fees and charges can easily end up in the thousands per year. With the RBA announcing the latest interest rate change on Tuesday, it would also be worthwhile to look at the bank’s history of interest rate changes. Do they typically pass on full interest rate changes?
Most importantly, be wary of promotions that seem too good to be true – they usually have hidden costs and conditions. As always, do your research and compare home loans on websites like RateCity to find the best deal for you and your needs.
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