Conjecture as to whether the Reserve Bank will or won’t pull the lever on interest rates again soon is continuing to make borrowers anxious, with a growing group of consumers set to put the banks under the pump and demand a better deal.
Sick of being held hostage by the big boys, thousands of homebuyers are banding together with consumer advocate Choice leading the charge.
But I don’t think ploy for lower rates will work.
The consumer magazine Choice is forming what will ultimately be a consumer powerhouse that they hope will push the banks to slash their rates or risk losing millions of dollars worth of business.
The threat to switch banks en masse has surprisingly never been attempted anywhere in the world to date, but Choice has partnered with Kevin Rudd’s former prime ministerial adviser, Lachlan Harris to pilot the project here in Australia and hopefully force lenders to rethink the deals they offer borrowers.
The logic behind the move is that when combined, the borrowing power of what is essentially a bunch of ordinary homebuyers will equate to the might that millionaires lend to their loan applications. Obviously banks scramble to win over these cashed up clients, offering them better products and interest rates on their borrowings in order to secure their business.
“We want to get millionaires’ rates for ordinary mums and dads,” says Harris, who has recently launched the aptly named One Big Switch with a schoolmate. The pair run a website with the assistance of Choice, which encourages everyone with a mortgage to register their interest to partake.
If at least 1,000 homebuyers with combined borrowings totalling hundreds of millions of dollars sign up in the next fortnight, One Big Switch will go in to bat using this hefty bargaining power to negotiate interest rates directly with lenders.
In order to retain existing customers and build their market share of mortgage business, the banks will have little option but to put forward competitive deals and outdo their rivals when it comes to offering attractive interest rates.
According to Harris, if homebuyers get on board, this will potentially represent the single biggest consumer-led purchase ever.
“The reality is that group switching is the only way that ordinary customers are going to get their voices heard,” he said. “Bills are going up and if group switching can do something to turn that around, then it will be a great thing for families.
“This is an experiment – it’s never been done anywhere else in the world – but if it works, it will help a whole lot of families. So it is absolutely worth a go.”
Christopher Zinn from Choice said people power was the only way to get a good result for everyday consumers.
“You can make all the changes in the world in a regulatory sense, but if you have 4-5 million people who can gather together, even though they have never met, but are informed and confident, that is a pretty potent mixture.”
I’m all for consumers having choices and getting the best loan deal available, but I’m not sure this consumer group will get the result they expect. It’s not like they will be giving one bank one big loan. They’ll be giving lot’s of small loans with different securities and different borrower’s needs. Not the type of business the banks will fall over themselves for.
If a borrower is looking for the best loan deal, they’d be better off seeking the services of a proficient finance broker.
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