As a broker, we have seen it all. So, let’s open your eyes up to some things which you probably know but may not have thought about too deeply. (I mean, when it comes to borrowing, it can be hard to get enthusiastic).
Whilst we love the big banks when they offer our customers the most suitable loan product, we are also wary of accepting all that we see and read from them at face value.
In reality, the big banks are no different to the big telcos., and the big insurers. They spend a fortune on advertising to try and convince you ‘they are best for you’. But this doesn’t mean they are.
However, for a borrower faced with a myriad of advertising messages and a history of having banked at the one bank all their lives, considering another lender other than ‘their bank’, can be daunting – and time consuming – and stressful.
Now, whilst we have a vested interest in recommending a broker (because, let’s face it, we love being a broker!) There are lots of good reasons why you too should consider whether walking into a high street bank is a good idea for you.
Here is our 14-point hit list of things you should know.
1. The big banks often offer their new customers better deals than their existing customers. And if you are swayed by their pitch, you will be an existing customer soon enough….
2. Big banks rely upon the principle of ‘the lethargy to change’. Because when you are on your own, it is hard work to change lenders. Lenders know this and they also know that a customer will be likely to stay put and only consider another loan product and lender if they are moving house.
3. Shopping for a loan at a high street bank is like shopping for clothes at a single brand retail outlet. You have no chance to compare with other suppliers and you have to buy from the suite of products they offer you.
4. When you only shop at one bank, you either fit – at a rate they are willing to offer you; or, you don’t fit – which means starting all over again somewhere else.
5. No one at your local high street branch will suggest you ‘go down the road’ to their competitor.
6. No bank is required to offer you their cheapest product.
7. The big banks have a ‘carded rate’ – which is similar to the rack rate for a hotel. They discount this rate from time to time to win business. And, if you negotiate a discount, it doesn’t mean you are paying their lowest rate.
8. No bank is required to keep you at their best rate. In fact, having a higher card rate allows a big bank to engage in ‘rate slippage’, whereby over time, your rate gradually becomes less competitive (and more profitable for the bank).
9. Banks don’t review your loan product to make sure it is still suitable. Until of course you try, and leave.
10. Big banks don’t give you a relationship manager. Just a 1300 number.
11. 7 out of 10 borrowers use a broker. That means only 3 out of 10 borrowers walk into their local branch.
12. Brokers may recommend one or more of the big banks. But they are required by law to only recommend them if they offer you a loan product which is suitable for you.
13. Around 60% of the loan products recommended by brokers are those provided by the big 4. That means just under half of their customers are being recommended loan products with other lenders and which the broker believes are more suitable for the borrower.
14. Banks don’t have a statutory best interest duty or responsible lending obligation. Brokers do.