Home loan rates: am I being ripped off?

As a loyal customer of your credit provider, you’d like to think that you’re on one of the best home loan rates. However, that’s most likely untrue if you’ve been a loyal customer. That means you’re on what’s called the “back book” of the bank’s home loans. As with many companies, banks get complacent and use you for the revenue you bring in. So the question stands, what’s the best way to get a good home loan rate? What do you do if you’re being ripped off?

This article will be handiest for those customers who always pay on time, never overdraw their accounts, are honest and have a high income. The reason that this is important is because your internal credit rating with your bank will be higher. Did you know that overdrawing your account, even by $1, can impact your credit rating? It’s incredibly important to keep on top of these things. Anyway, onto the steps every high-performing customer should take.

  1. Evaluate your existing lending. There’s no use calling your bank and complaining about rates if you’re comparing apples to oranges. What I mean by that is, you shouldn’t just look at the cheapest loans on the market and compare your loan to that. Figure out what you have. Do you have a line of credit? Do you have a professional package? Do you have a no-frills home loan? Find out which loan you have and see what interest rates that bank is offering on the product that you already have.
    Note: If you can’t be bothered doing this, see a mortgage broker and they will help you, often for free.
  2. Research what kind of rates are out there, based on your needs. If you need the flexibility of a line of credit, don’t expect home loan rates. It costs banks more money to have those funds available for you to draw upon at any time, than it does for you to have a home loan that’s fully drawn. So for that reason, you should again compare apples to apples. If you no longer require that additional flexibility, you can downgrade; but you can often do this within your own bank, without actually refinancing anywhere.
  3. Speak to your bank. Once you’ve figured out what you actually have and what’s out there in terms of rates and packages, you should call your bank. If you have a specific contact such a relationship manager, they may care slightly more about your dissatisfaction than if you have to call a call centre. Whilst there’s no need to be rude, you should as for a Discharge Authority if you feel like you’re getting nowhere. A Discharge Authority is the form which you’d need to fill in if you were refinancing. Don’t be surprised if the call centre operator is not in a position to help you and try to remember that it’s not their fault that your rate is higher, even though you are an existing customer.
  4. Speak to a mortgage broker about refinancing. If you’ve still not had your pricing reviewed to your satisfaction, you need to speak to either another bank, or a mortgage broker. Mortgage brokers can help you distinguish what’s actually being sold to you. For example, if someone is trying to refinance you into something with a much lower rate but much higher fees, this is something that a broker should be able to warn you about. Also, don’t be surprised if you move away from the major banks to find that there may not be quite as much payment or technical functionality in smaller banks than large ones; check first. Just make sure you go somewhere that you are comfortable with in terms of fees and technology if you do go somewhere else.
  5. If you’re right about being ripped off, bite the bullet and leave. Banks, after all, are there to make money. You could have a brilliant relationship with a banker, and that’s fantastic and definitely something to think about. It’s rare to find talented and caring people anywhere, so I wouldn’t leave purely based on rate if I was in that sort of scenario. However, if you find that the bank is trying to save your business based on everything except for price, you should be prepared to bite the bullet and just leave. New customers will almost always get better deals, so you may be better off becoming a new customer at another bank.

So there it is. Obviously this is not applicable in every situation (for example, if you have hard some sort of financial hardship or are unable to keep up with your loan repayments), but it will apply to many people who have been silently paying off their home loans. Home loan interest rates are at such a trough right now that it’d be difficult not to take advantage of them, and so irritating to see everyone else paying 1-2% less than yourself.

 

ASIC’s MoneySmart – TrackMyGoals App Review

ASIC’s MoneySmart is a fantastic resource for all Australians who are in a place to take responsibility for their financial situation. Not only do they come up with some brilliant content, but they have also recently released an app to help people reach their financial goals. This article serves to independently review the app.

Here are some images of some of the app’s features:

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As you can see, the interface is nice and simple and it has clear marks and colours, which are in line with the MoneySmart branding. I think that objectively, it’s a great tool if you don’t already track your savings elsewhere in a visual way. However, there are Google Tools and budgets which already help do this for free. You can use these tools on your phone.

Although, if you’ve never tracked your goals or habits, this app can be nifty for you. Your goals are not limited to just saving money, but they do have to do with money. By this I mean, you can ask the app to track a particular purchase goal. It’s great that there’s a free tool out there to help keep us accountable.

One thing I immensely disliked about this app were some of the savings tips. A previous article on Help Me Bank was about savings tips but I tried to at least demonstrate that I had used these tips. However, the tips I disliked on this app were as follows:

“Put a timer in your shower to reduce water and power use”. I don’t like this one as it puts personal hygiene on a back burner and also implies that everyone showers in a wasteful way. I think it could actually cause more harm than good.

“Shop around for a bank account with cheaper fees”. This is wrong. Customers should be advised to try and find a free bank account, because there is one of those available for the needs of most people. 

“Don’t buy books and DVDs, borrow them from your local library”. This is a wonderful way to discourage people from supporting arts and literature. 

“Go on a picnic or to a free outdoor concert”. Firstly, picnics aren’t free. Tip #1 in the app is to write a grocery list and stick only to what’s on that list. What if you didn’t budget for a picnic? Or do you expect to invite a bunch of people and mooch off them because you’re the organiser? Also, where are these free outdoor concerts?

“Quit your gym membership and walk or ride your bike to work”. This just encourages unhealthy living habits. The riding your bike to work not only assumes that you in fact have a bike, but that you also live close enough to ride to work. I know people who catch a three hour train to get to work. I wonder how long it’d take them to ride a bike. 

“Give up drinking coffee or alcohol for a month.” There are ways to drink coffee for cheap without giving it up. Not going to argue against alcohol.

“Buy in bulk and only go grocery shopping once a month.” This assumes that you’re not living in an apartment with a tiny fridge space. It’s absolutely presumptuous to think that people can fit a month’s worth of groceries into their fridge and freezer. Clearly the person who thought of this tip isn’t in touch with reality about how many people actually live. 

“Lock up your credit card for a month and only pay for things with cash.” This only teaches people that their credit card is something negative, and not something that they can use to get free Reward points for their usual expenses. It doesn’t teach discipline, it just sweeps the problem under the carpet.

“Check out your local public transport options to save on petrol, tolls and cabs.” Again with being detached from how many people live. MoneySmart, as awesome as you are, don’t you think that most of us already travel by public transport?

My commentary might come off as harsh, but these tips seem rather disconnected from the real people of our society, and that’s precisely why Help Me Bank exists.