- How to leave your bank in six steps
- Moving loans can save thousands
- More help: Money guides and tools
THE decision by the Commonwealth Bank to increase its standard home loan rate by almost double that of the Reserve Bank's rate rise has unleashed a torrent of anger about Australian banks.
So what do you do if you've had it with your bank and want to change? Below is a guide to how to go about it - it can be a bit tricky, but could save you thousands of dollars. Scroll down to get straight to it.
The banks have a number of arguments for why they have been increasing their mortgage rates above the increases announced by the RBA.
CBA said it had increased its rate because of "continued increases" in its funding costs.
Westpac's chief Gail Kelly went further, saying that higher funding costs mean the gap between interest rates and the RBA's official cash rate would continue to grow.
Many experts agree with the banks. The Reserve Bank recently published a report saying there was little justification for an out-of-cycle rate rise but also confirming the banks were not gouging their customers.
And one commentator, the Herald Sun's Terry McCrann, said the CBA's higher rate rise may spare the central bank from having to raise the official cash rate in December.
But in politics it has been open season on the banks. Opposition Treasury spokesman Joe Hockey was all smiles, showing his nine-point bank reform plan to all and sundry.
While Treasurer Wayne Swan countered he would unveil his own banking reform plan next month. A key feature might be the abolition of bank exit fees.
In the meantime, news.com.au has put together a step-by-step guide to switching your loan to another financial institution.
There are big savings to be made, with borrowers who defect from the "big four" banks to cheaper rivals could reap the savings within months.
Step 1 - Try to get a better deal
See if you can negotiate a better deal with your current loan provider. Independent financial comparison website Mozo provides a free Home Loan Negotiator service for customers. Mozo finds that on average they are able to save customers 0.75 per cent on their home loans, spokeswoman Kirsty Lamont said.
Step 2 - Check exit fees
If you aren't happy with the result, you need to first check that you won't be hit with an exit fee when you change your mortgage provider. This detail will be outlined in your original loan contract.
If you can't find the figure, then you can request it from your financial institution. Many people are surprised to discover home loan exit fees can add up to thousands of dollars, Ms Lamont said. This is particularly so for non-bank lenders who tend to charge fees as percentage.
Step 3 - Shop around
Comparison websites
Shop around for a new mortgage. You can use independent financial comparison website such as InfoChoice, Mozo, or Canstar Cannex. This will allow you to compare hundreds of lenders and loans on the one website.
Mortgage brokers
If you want more personalised advice and service then it pays to talk to a mortgage broker, such as Mortgage Choice or Aussie. But they may not deal with all lenders so you have to be direct in asking who they represent and what they commission they get paid.
Banks
Talk directly with a financial institution. The big four banks issue most of the home loans in Australia.
* ANZ - 13 13 14
* Commonwealth Bank - 13 22 21
* Westpac - 1300 130 467
* NAB - 13 22 65
Credit Unions and building societies
These financial institutions are owned by members and operate for the benefit of their members, Ms Lamont said. This means they often have lower rates and fees as they don't have to earn big profits for their shareholders.
APRA has a full list of authorised deposit-taking institutions.
Step 4 - Do your sums
Do the sums before you settle for a mortgage with lots of bells and whistles. They come at a price and you may not need all of them or they may not be suitable for your situation.
It also pays to find out if the institution offers flexible features such as the ability to make extra repayments, a free redraw facility and an offset account, Ms Lamont said.
Step 5 - Negotiate before switching
If you get a reduced rate, ask if you have to transfer all your accounts to the new mortgage provider. Many Australians don't realise that they are eligible for home loan discounts, Ms Lamont said.
For example, if the loan is above the average of about $300,000, most banks will offer a discount on loans about this level. She warns that the onus is on the borrower to ask for the discount as the bank may not offer it to you.
Step 6 - Switch to new account
Switching a new account can be difficult if you have automatic payments set up. Choice and the Federal Government both offer guides to changing financial institutions.
Read more: http://www.news.com.au/money/banking/how-to-switch-your-mortgage-provider/story-e6frfmcr-1225947692633#ixzz14MvKeesv
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