A third of borrowers would ditch big four banks for 50-basis-point discount: CUA

Nearly a third of borrowers (30%) say they would ditch their Big Four bank if another lender offered them a 50 basis point discount off the rate they are currently paying, according to a survey by Australia’s biggest mutual lender, CUA.

More than half (56%) said they would “consider” switching for a 50 basis point discount.

Even a smaller discount of 25 basis points would tempt 60% of Big Four borrowers to consider refinancing with another lender.

Overall, the CUA’s National Mortgage Survey found a high level of discontent among borrowers who have their loans with Big Four banks.

A fifth (18%) said they would ditch their Big Four bank if they did not adjust their mortgage rates following an RBA cash rate cut with 60% saying they would “consider” doing so.

In addition, 70% of these borrowers would switch or consider switching for lower fees and charges.

“Overall, Australian mortgage holders are looking for a lender that provides competitive rates and makes decisions that are in the customer’s best interest,” says CUA’s general manager for products and marketing Jason Murray.

Borrowers who opt for a standard variable home loan would be 55 basis point better off with a CUA loan compared with a standard variable rate home loan offered by the Commonwealth Bank.

The CUA's standard variable rate is 5.85% (comparison rate of 5.91%) while the Commonwealth Bank's standard variable rate is 6.40% (comparison rate of 6.54%)

However, the Commonwealth Bank is more competitive on fixed rates and discounted variable rate offerings.

The lowest variable rate mortgage currently offered by CUA is its rate breaker package home loan at 5.42% with a comparison rate of 5.75%.

The CUA offers a three-year fixed rate of 5.30% with a comparison rate of 5.81%.

The Commonwealth Bank, offers a no-fee variable rate home loan at 5.70% with a comparison rate 5.70% and a one-year guaranteed rate of 5.34% with a comparison rate of 6.43%.

Its three-year fixed rate is 5.54% for non-home loan package customers and 5.39% for those that do opt for a packaged home loan deal.

Property Observer compiled this list of the lowest home loan rates offered by the major banks and their subsidiaries on January 8.

The CUA survey found that across all borrowers (not just those with a Big Four home loan), the propensity to refinance with another lender appears high with more than three-quarters (78%) of all mortgage holders saying they would switch or consider switching if their current lender failed to adjust rates following an RBA rate cut.

The results are based on a survey of 1,514 people carried out by Auspoll, commissioned by the CUA, of which four out of 10 have a mortgage.

Of those respondents that have a mortgage, 62% have their home loan with a major bank, 8% with a credit union or mutual lender and 31% with another lender (smaller bank or non-bank lender).

Respondents were questioned on their attitudes towards interest rates, switching home lenders and fixing their interest rates.

Other key findings from the survey were that fixed home loans remain largely unappealing to the majority of borrowers despite lenders continuing to cut fixed rates.

Only 7% of variable rate mortgage holders said they intended to fix their home loan in the next three months with 71% saying they had no intention of fixing.

The remaining 22% said they would fix their home loan, but not in the near future.

This is slight improvement on the 3% who said they would fix in last year’s survey and the 75% of respondents who said they had no intention to fix at all.

However, even among those survey respondents who expect rates to rise in 2013, fixed rates remain unappealing.

“Of those variable rate mortgage holders surveyed who believe rates are at the bottom of the cycle and will increase in 2013, still only 31% would plan to fix their mortgage in the future,” say CUA’s general manager for products and marketing Jason Murray.

Less than a third of those surveyed expect a cash rate cut in February and remain divided as to what will happen to interest rates in 2013.

Around 37% believe the cash rate will decrease further in 2013 while an almost equal number (38%) believe rates will be higher at the end of the year.

A quarter of respondents expect rates to stay the same in 2013.