Breaking up with your bank, could it have saved you $23K?

Most of us have been guilty of sticking out a relationship that has passed its used-by date, but when that relationship is with a mortgage provider it can be costly. 

Research from RateCity shows that the cost of staying with the big four banks over the past 10 years, rather than switching to one of the lowest rates, is $14,215 for a $300,000 loan and $23,692 for a $500,000 loan*.

It’s not too late to switch

Customers who have outgrown their bank can vote with their feet by switching lenders.  There are interest rates for owner-occupiers of under four per cent at the moment, including from UBank, Loans.com.au and ING direct. 

Switching loans may be confronting initially, but once you start comparing lenders and making a few phone calls, you’ll find there’s a healthy amount of competition at the pointy end of the market.

Switching does come with a bit of paperwork – there’s no denying that – but it has gotten a lot easier financially over the years with the ban on exit fees in 2012.  This means your current lender can no longer penalise you for taking your business down the road.  

Be aware, some home loan products do have an application fee, but the average cost of these is $421 which is relatively small change when compared to the savings you’ll make each year. Additionally, there are over 400 products that don’t have any upfront fees whatsoever, so its good to bear this in mind as well when you are shopping around.

*Calculations based on total loan book for each month, multiplied by the applicable interest rate for that month, divided by 12. 

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