New data has shown that 70 per cent of Australians no longer trust the big banks, and one in three is seeking expert advice on switching their home loan product.
New research conducted by comparison site Mozo has found that 70 per cent of Australians do not trust the big four banks, with half of that figure losing confidence after their failure to pass on the Reserve Bank of Australia’s rate cuts to customers.
The survey, conducted on over 1,000 mortgagors between 8 and 12 October 2019, found that one in four customers holding loans with a big four bank has already left, or is intending to leave, in favour of a non-major lender offering a better deal.
However, respondents also highlighted that there are a number of obstacles that may hold Australians back from making the switch.
A significant roadblock for switching loan products appears to be a lack of knowledge, as 38 per cent stated they did not know enough information to make the switch from their current lender, and one in five said they were not informed enough about rate cuts to make a decision about their bank.
Further, one in three respondents stated that they feel they need to sit down with a mortgage expert in order to discuss their home loan product and potentially switch their lender.
The big banks’ inability to immediately pass on full RBA rate cuts like online lenders often do has affected the trust of those aged 25-34, according to the study, with one in four having lost faith in their lender after rate cuts were not passed on.
Additionally, 45 per cent of this age group stated they intend to switch providers.
Lower interest rates were perceived as the greatest benefit of getting a home loan with an online lender rather than a traditional bank, followed closely by lower fees and charges; however, one in four respondents stated they believed there was no advantage to choosing an online provider.
According to Mozo, compared to the average home loan rate offered by the major banks, borrowers could be saving $75,000 on a $300,000 owner-occupier principal and interest loan over a 30-year period by choosing a competitive online lender.
Mozo director Kirsty Lamont commented on the shifting perception of the big banks by the ordinary Australian.
“Australians are making it crystal clear that they are not impressed with the big banks, with 62 per cent saying the big four are putting profits before customers.
“The days of bank profiteering are well and truly coming to an end, with online and smaller banks offering ultra-competitive rates and minimal fees,” she said.
“Mozo’s latest research indicates that there could be a major shift in where Australians choose to do their banking.
“Online home loan lenders currently hold a paltry 6 per cent of the population, but the tide could be turning, with half of Australians saying they would consider making the move.”
Ms Lamont said that while borrowers may be reluctant to turn to online lenders at first, it is worth the switch considering the deals that are available.
“It’s understandable that Australians are exhibiting a level of trepidation regarding applying for a home loan online, given it may well be the largest sum of money they borrow in their life,” she said.
“That said, an online lender can easily save you tens of thousands of dollars over the course of your loan as well as offering the same level of security as any major bank.
“Our research found that nearly 20 per cent of big four customers felt their money was ‘secure’ with the big four.”
Ms Lamont concluded: “Only 19 per cent of Australians believe that the big banks are doing what is necessary to stay afloat in the wake of the rate cuts, leaving a massive 80 per cent unimpressed with big bank behaviour.
“The writing is on the wall for many borrowers, and now is the time to find the most competitive rate on the market and reap the rewards.”
[Related: One in five consumers to switch banks]
Hannah Dowling is a journalist for The Adviser and Mortgage Business.
Prior to joining Momentum Media, Hannah worked as a content producer for a podcast catering to property investors. She also spent six years working in the real estate sector at a local agency.
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