For every 100 Australians with a gripe about their financial institution, just five will actually do something about it and make the switch to a better option, new research shows.
A survey of 5000 consumers found that a vast majority of Australians are ignoring the loud calls from Government and industry to switch financial institutions to get a better deal, with just 5 percent of respondents having switched banks over the past year.
This lack of action can be partially attributed to Australians being increasingly time-poor and prioritising other tasks, but also to Aussies feeling emotionally invested with their bank, often having multiple products with the one institution.
Damian Smith, chief executive of RateCity, said if that anger isn’t channelled into action, there will be no impact on how the banks behave.
“Politicians bashing the banks, commentators scolding them, tweets lambasting them – these are all, no doubt, irritating to the banks. But they’re not going to change their behaviour.
“The only thing that will change them is customers leaving – if enough variable rate home loan customers leave, then the additional revenue from rate rises will be offset, and I can promise you the banks will change tack,” he said.
Recent home loan rate rises alone aren’t the reason the switch – they add a relatively small amount to each monthly repayment. For instance, a rate increase of 10 basis points to 7.10 percent on a $300,000 mortgage would cost around $20 per month, or about $0.65 per day.
The real reason to compare and switch home loans or credit cards, said Smith, is the absolute level of rates from the big four and the difference with the market.
“The big four now have an average standard variable rate of over 7.3 percent. Even with relatively common discounts of 0.5 percent, that’s still over 6.8 percent for most borrowers. At the moment there are maybe half a dozen loans with variable rates below 6.3 percent. On a $300,000 mortgage, moving from 6.8 percent to 6.3 percent will save you nearly $100 per month, or just over $1100 per year. Moving from 7.3 percent to 6.3 percent would see a saving of $190 per month or nearly $2300 per year.
“So my advice to people who are genuinely, and understandably, angry about how the big four are moving on rates is this: unless you show that you’re ready to move to a different lender, with more competitive rates, be prepared for ongoing rate rises,” he said.