Home Loan borrowers need to wake the #@!% up

Paul Ryan | September 06, 2018

Okay, I’ve tried to be nice. I’ve produced blogs and vlogs of encouragement for home loan borrowers to understand the importance of knowing the interest rate on their home loan. 

I get it, I really do… talking about a mortgage, a home loan, interest rates, the banks, the money they make and whether we can make a difference or not, isn’t as juicy as …… well I best to let that one go through to the keeper. 

Unfortunately research continues to tell us 80% of Australian home loan borrowers don’t’ know the interest rate on their home loan so the messages of encouragement are not getting through.

So, I’ll be blunt….. we need wake the #@!% up ….. and here’s why.

Last week Westpac announced they were increasing their variable rates by 0.14% and now ANZ (0.16) and CBA (0.15%) are increasing their rates. Seriously, can you believe the brazenness of their decision making… the Banking Royal Commission hasn’t even finished yet.

If, we allow ourselves to reflect for one minute and consider, (as Westpac moved first, I’ll pick on them)

* The Reserve Bank of Australia hasn’t moved the cash rate for 25 months – still 1.5%

* Westpac annual profit last year was $8B. In May 2018, they announced a half yearly profit of $4.2B

* If as reported Westpac home loan portfolio is around $400B and let’s say 20% of their loans are on fixed rates (not subject to this rate increase) – with one simple click of a button the 0.14% rate increase will deliver Westpac additional revenue of $448M.

The population of Australia is approximately 25M. If we assume 75% of the population are over the age 18 and legally able to borrow money, it means 18.75M Australians at the mercy of financial institutions. 

Population wise we’re small yet the combined market value of the big four banks in Australia is approximately $384,000,000,000!!

I’ll let people far smarter than me debate the economic merits of this observation but I will call BS on the PR spin to increase rates.

So what can we all do?

It’s as simple as finding out what your interest rate is and then making a phone call to your lender to ask them for a better rate.

As a guide, aim for a rate around 3.7 to 3.8% (there are lower rates available if you really want to have a crack)..... the cash rate is 1.5% after all.

Let me give you some real life examples of the potential benefits of calling your lender:

* Matt - rate was cut from 4.9% to 4.1%

* Pam - rate was cut from 4.62% to 4.09%

* Sean - rate was cut from 4.19% to 3.74%

* Adam - rate was cut from 4.09% to 3.74%

* Paul - rate was cut from 4.34% to 3.74%

Come on Aussies, come on – call your lender today.