Does bank familiarity breed financial contempt?

Last year the Australian government, led by a bullish treasurer Wayne Swan, determined to up the ante when it came to competition among lenders, abolishing early termination fees in a bid to make it easier for borrowers to shop around for a better deal and beat the banks at their own game. 

Interestingly, a national survey recently released by Canstar Blue indicates that, even without the threat of hefty exit fees, borrowers have failed to heed the call from our politicians and industry insiders to switch banks.

Results of the national survey, that asked 5000 respondents whether they had taken their borrowing business elsewhere in the last 12 months, revealed that only 5 per cent have actually made the switch in search of a better deal.

Canstar Blue manager Rebecca Logan says, “These results show no matter how much choice is out there and how often we are urged by the Government and the banking industry itself to search for and change to a better deal, as a nation we tend to struggle to leave the banking relationship we are currently embedded in.”

“Australians are increasingly time poor and banking decisions tend to be one we continue to put on the backburner to focus on what we perceive to be more pressing tasks. Many consumers also have multiple products with the one institution which is another common impediment to making a change as people often feel invested emotionally with their provider.”

Fees or foe?

Of those who decided to jump ship and go with a different lender, 23 per cent made the move based on fees, 15 per cent said they had a better offer elsewhere and 14 per cent wanted lower interest rates.

So with a whopping 170 lenders currently vying for the business of Aussie borrowers, why are we seemingly so complacent when it comes to seeking out a more competitive product?

For some, it’s a matter of misplaced loyalty. Even though ours is a relatively young country, we still seem to get set in our ways and follow the lead of generations gone before quite willingly. If X Bank was good enough for our parents and their parents before them, it’s good enough for us too!

You only have to look at the fact that the major four players in Australia still boast over 90 per cent of home loan business, despite the fact that many smaller, boutique lenders offer better deals, to know that we tend to stick with that which is familiar and comfortable.

Ironically, there is perhaps more competition among lenders now than ever before in our short history, even though the Canstar survey results suggest that most banks have little to worry about when it comes to customer retention.

I think it’s high time that we become more pro-active when it comes to managing the mortgage and our banking habits. It’s never been easier to switch lenders and with many qualified and experienced brokers now on hand to wade through all of the alternatives for you, there’s very little reason not to consider the array of options out there.

In this uncertain economic climate, when many of us have decided to once again start saving our pennies just like our parents did, maybe it’s time we broke with some familial traditions and started saving on our mortgages too.

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Rolf is Director of Metropole Finance and has twice been voted Australia's leading finance broker. He shares his wealth of knowledge about how to best use property finance to fund investments.
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'Does bank familiarity breed financial contempt?' have 1 comment

  1. Avatar for Property Update

    October 12, 2012 @ 6:25 pm Sharemarket College

    I am a Probationary Officer in State Bank Of India. The content which you have shared is totally relevant to my field.


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