Mortgagors most likely to seek product switch

The study, produced by Deloitte Access Economics, examined consumer satisfaction and behaviour towards their current bank or financial provider in regard to their everyday transaction accounts, credit cards, and home loans.

The research aimed to understand the extent to which account holders switch banks or financial providers for their financial products, thus giving insight into the state of competition in the banking sector.

It found that overall, approximately 2.8 million customers switched the provider of their financial products in 2018, including 15 per cent of customers who switched banks for their everyday transaction account, 10 per cent who switched credit card providers, and 5 per cent who have refinanced their home loan with a new lender.

Additionally, almost a quarter of customers specified that they were ‘actively searching’ for a new home loan product, 22 per cent said the same for their transaction account, and 21 per cent were looking to switch out their credit card. 

Deloitte suggests that as home loans are much more complex offerings than transaction accounts or credit cards, consumers are far more likely to seek advice from trusted advisers, as well as friends and family.

In fact, of the three financial offerings examined, consumers were more likely to seek advice or information regarding mortgage products over other financial products.

The study found that 63 per cent of mortgage account holders had asked friends, family, brokers or financial advisers for advice on alternative mortgage products in the last three years, compared with 48 per cent of transaction accounts owners, and 43 per cent of credit card holders.

Additionally, about two in three mortgage owners had sought out and looked at the home loan offerings of another bank, at some point.

Despite this, mortgage account holders were the least likely to switch banks or financial providers in 2018, according to the study.

The results found that of the consumers who have considered refinancing, one in four mortgagors decided they are ‘comfortable’ enough with their current offering to not proceed with the cost and effort involved in switching banks.

Other highly cited reasons for not refinancing include ‘I’m still thinking about it’, ‘it was too hard to pick a bank or compare banks’, and ‘there are no better options available’.

On the other hand, respondents who went ahead with switching home loan providers decided to on the basis of better mortgage terms, as well as financial gains such as lower interest rates.

Respondents who had decided to refinance their home loan in 2018 stated that ‘finding a better mortgage’, such as one that includes an offset account or the ability to fix part of the loan, was the biggest driver behind their decision to switch.

Additionally, factors that drive better value, such as lower interest rates or lesser fees, were also significant, and ranked as the second highest motivating factor to refinance.

According to ABA chief executive Anna Bligh, the results show that competition is still strong between banks.

“Whether you’re looking for a new home loan, a credit card or a transaction account, competition for a customer’s business is fiercer than it has ever been,” Ms Bligh said. 

“According to this report from Deloitte Access Economics, 2.8 million customers switched banks for their home loan, credit card or transaction account last year.

“The numbers speak for themselves when we say competition is robust, with 15 per cent of everyday transaction account holders, 10 per cent of credit card holders and 5 per cent of mortgage holders switching banks in the 12-month period.

“On the flip side, most customers are satisfied with their bank product, with 79 per cent of everyday transaction, 75 per cent of credit card and 67 per cent of mortgage owners saying they are ‘very satisfied’ or ‘satisfied’ with their providers.

“The message to all Australians is if you aren’t satisfied with your home loan, credit card or other product, it pays to shop around to get the best deal possible.”

[Related: Low rates fail to lure new home buyers]