If anything's going to make you end a loveless mortgage with a Big 4 bank, as I regularly entreat, it's last week's shock interest grab.
But,
loath though I am to defend such opportunistic actions, it seems that
behind closed doors our biggest banks are kind and generous. Never
thought I'd type that.
Today I can reveal that while borrowers are being hit with hikes in public, banks are acquiescing to juicy discounts in private.
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Talk about mixed messages.
Don't get too excited if you're an investor though.
Three
months ago this week the Big 4 banks definitively ended their long-term
flirtation with investment loans by imposing an out-of-cycle rate rise,
and stricter lending criteria, on just these. They did it because AURA
has capped investment loan growth at 10 per cent a year in a bid to
protect the banking system from any property wobbles.
Borrowers
with the big banks, 86 per cent of investors, are collectively paying
$54 million a month more before the recent rises. So their bill is $162
million so far. (Based on the current advertised headline investment
variable rate of 5.64 per cent, the latest AURA home loan values and
data provider finder.com.Au's estimate that 70 per cent of these loans
are variable).
Precisely half of all lenders have now seized the
chance to hike investor rates specifically, says comparison website bozo.com.Au, by an average of 0.25 per cent.
Last week marked the
first time owner occupiers have been slugged alongside investors, by 0.2
per cent from November 20 for all Westphalia customers (with the
justification of building capital reserves to satisfy AURA rule changes
next year).
But a new mystery shopper study by Mozo reveals the
Big 4 are secretly lopping a full 1 per cent on average off advertised
owner-occupier rates, up from 0.9 per cent a year ago, and in some
circumstances stretching that to 1.25 per cent.
Just taking the
average discount, that means there is a potential $403 million a month
in total interest savings up for grabs (at today's average discounted
variable rate of 4.44 per cent on the nearly $500 billion of big bank
loans assumed to be variable).
If you have the ABS-reported
(record) average home loan of $371,200 (makes me tear up just thinking
about it), that's an individual saving of $215 a month, $2580 a year or
more than $60,000 over the life of your loan.
Which would well and truly wipe out the $45 monthly cost of a 0.2 per cent increase to your base rate.
Let
me be clear, these discounts are substantially higher than the
"professional package" discounts banks disclose (which are sitting at an
average 0.77 per cent). You won't find these secret deals published
anywhere; you have to call and coerce.
And don't assume that, as an existing customer, you won't qualify.
Yes,
Mozo surveyed the average discount offered on two new owner-occupier
scenarios – a first home buyer looking for a $300,000 loan and a
refinancer seeking $500,000.
But with investor loan growth locked
down, banks will be scrambling not just to supplement but to sustain
their loan books. And they face fierce competition.
Today our big
banks' share of the owner occupier market is far below investor loans,
at 82 per cent, as ever-cheaper online lenders muscle in. If your bank
knocks you back for a discount, you shouldn't hesitate in remortgaging
to one of these low-overhead outfits to save even more.
The
best-priced product is regularly changing but is currently iMortgage
Fusion with a variable rate of 3.84 per cent. Were every customer to get
the hump with big bank treatment and switch to this, the total saving
on today's rates would mount to $645 million a month! I suspect
iMortgage would also encounter some resourcing issues.
(Note
iMortgage doesn't have an offset account so I prefer the cheapest
product that does: Click Loan's Online Home Loan at 3.91 per cent.)
What
about poor – literally – investors? They usually can't access the
bargain-basement online mortgages. But despite the lending crackdown,
big banks are even extending some decent discounts here.
Mozo says
if you play your negotiating cards right, you could still secure a 0.8
per cent reprieve depending on loan size – down by 10 to 25 basis points
on a year ago.
This would take today's average rate to 4.84 per cent and save investors a collective $214 million a month.
The
banks were also willing to entertain deeper discounts on a case-by-case
basis. A spokesperson said: "Mozo's mystery shopper was able to
negotiate a 1.25 per cent discount from CommBank for an investor loan of
$1 million with a loan-to-value ratio under 80 per cent, and the other
banks stated that deeper discounts could be made available once the
borrower had submitted an application."
We might now get an
official rate cut on Melbourne Cup Day too, as the Reserve can worry
less about stoking a hot property market. Whether or not that's passed
on is another matter.
