Independent research reveal that about 50% of people are ready to ditch and switch lenders should red tape be eliminated and the implementation of the tick and flick approach by the Federal Government on July 1 makes it that much easier for borrowers to switch accounts.
The government’s announcement of the reforms to be done on lender switching processes was greatly appreciated by Abacus – Australian Mutuals who recently employed Roy Morgan research to find out what it is that would help make borrowers switch lenders.
Research revealed that “one in five Australians are likely to change financial institutions in the next year, rising to almost 50% of people if the paperwork and administrative effort was substantially reduced.”
Abacuschief executive Louise Petschler stated, “Abacus welcomes this important consumer research from Roy Morgan which illustrates the opportunities and challenges facing our industry in the coming months. The report shows Australians are itching to ditch and switch to banking providers that offer competitive interest rates, fairer fees and charges and the convenience of branches and ATM networks.We offer this in spades and our members look forward to Australians switching to us in 2012, particularly when significant account switching reform begins on July 1.”
The survey conducted on 18-64 year old respondents found that, “21% of people are likely to change their main financial institution in the next 12 months, with interest rates not being competitive (35%), and high or unfair fees (30%) listed as the main reasons for the change and 49% of people would be likely to change their main financial institution in the next 12 months if the administration process of moving finances, direct debits and scheduled payments could be handled automatically by their new financial institution.”
Further, the press release stated that, “from July 1, instead of requesting a list of regular debits and credits from their ‘old’ bank, Australians can let their ‘new’ bank do the work for them by signing authorisation forms to allow the establishment of regular debits and credits to the new transaction account.”
Abacus is encouraging Australians to look around and find a better dealand consider the choice, value and competition offered by other sources like building societies, credit unions, and mutual banks.
“Switching is easier than you think, and we recognise the next 12 months will be an exciting time for Australian consumers and our industry,” added Petschler.
Contrary to common opinion, none of this is good news for mortgage brokers as lenders already claw back substantial commission where a loan is refinanced within 18 months. If borrowers are encouraged to refinance on a whim with no exit fees and easy account switching , the result is that mortgage brokers are faced with performing work for which they may not be paid. Alternatively mortgage brokers may have to impose fees on clients whose refinance results in commission claw backs. After all no fair minded person should expect a mortgage broker to work for nothing however it undermines some of the government’s strategy. A good solution would be for the government to ban broker commission claw backs ….. but that isn’t going to happen 😉