Fresh analysis has identified a growing exodus from incumbent lenders amid household pressure, heightened competition, and a widespread failure to engage customers before they decide to leave.
Elula, an Australian financial-services technology company, has identified a growing borrower exodus from banks, with its latest analysis suggesting customer departures are increasingly driven by service, product fit, and engagement failures, as opposed to refinancing rates or property sales.
The company found that more than $371 billion in home-loan balances moved between lenders during the year to 30 June 2026 as borrowers refinanced or sold property.
Around 664,000 customers switched lenders over the financial year 2026, equivalent to more than 1,800 borrowers a day, with more than $1 billion in mortgage balances moved on an average day during the financial year.
The analysis also found that about 1.3 borrowers with mortgages exceeding $700,000 changed lenders every minute.
Home-loan churn increased by more than $41 billion in FY26, representing a 13 per cent rise on FY25, while the number of customers leaving their lender also grew by about 48,000.
The number of customers moving an existing mortgage to another lender increased 9 per cent from the previous financial year, while the number exiting their bank after selling a property fell 3.1 per cent in the June quarter from a year earlier.
Banks’ approach to refinancing-driven churn ‘reactive’ and ‘dated’
Elula CEO Josh Shipman said that the decline in property sale-related customer exits indicated that the rising churn was being driven predominantly by borrowers retaining their homes, but seeking a different lender, product, or customer experience.
He said many banks were learning of a borrower’s intention to refinance only at the final point of the process and that this left banks with little time to understand or address the reasons behind the decision.
“Most lenders only learn a customer is a churn risk when they receive a request to discharge their loan, which is far too late. Majority of lenders are reactive and have very basic and quite dated modelling,” he said.
Shipman added that lenders needed to recognise the factors making borrowers more likely to switch before a refinance decision was locked in.
“What banks are missing is the ability to identify customers with high-churn risk – ahead of time, with the ability to understand why the customer is at-risk, and what conversation to have proactively to meet their needs,” Shipman said.
More than a pricing decision
Shipman also outlined that lenders were increasingly overlooking the broader changes in a customer’s lending needs, adding that the critical failure was that banks were often absent at the point when those changing needs first emerged.
“The fundamental gap is that most lenders fail to engage the customer at a moment when their lending needs are about to change. The missed engagement opportunity leads to the banks not being aware of their changing needs and not being there to support their customers,” he said.
The CEO further disputed the notion that price was the overriding reason customers were refinancing and noted that Elula’s assessment suggested service quality, unresolved complaints, and product fit were the more significant reasons for most lender departures.
“The big myth is that customers leave for a better rate – that’s not accurate. Of course, some customers leave because they’re price sensitive but that represents only 35 per cent of churning customers,” he said.
“In fact, 65 per cent of customers leave of other reasons; service, unresolved complaints, product fit, customer experience – these are the main points lenders should focus on. Pricing is just one element, but true customer service always wins.”
Retention under pressure
Shipman said the acceleration in churn had turned retention into a central growth challenge for lenders.
He noted that banks with churn exceeding system growth risked losing more business than they were acquiring and said that stronger customer understanding and technology-enabled retention strategies would allow banks to retain their customers.
“Growth isn’t an accident – it’s a discipline. If your annualised churn rate is over 7 per cent, it’s already too high. The system growth is around 7 per cent, and if your churn rate is higher than your growth rate then you’re losing more than you’re gaining,” he said.
“The banks that will come out on top are those that understand their customer, the importance of retention, are commercially astute and are able to partner with technology companies to deliver strong retention performance.
“This will enable them to do the thing they do best – be a bank. It’s time to take retention seriously because your competition is taking your customers.”
[Related: Mortgage growth significantly eases among top 10 ADIs]
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