The big four aren’t the only banks feeling margin squeeze. Smaller banks are feeling the pressure too but at least one says they are less likely to move independently of the RBA, another reason to shop around for the best rate.
That 6 basis point increase on a $400,000, 25-year loan at 7.3 per cent (which would increase to 7.36 per cent) translates to an annual increase in repayments of $186.12.
Blue sky ... at least one smaller bank is taking a long-term view and may be less likely to raise rates out of cycle.Photo: Rob Homer
“We are all experiencing margin squeeze and cost of funds is part of the picture as is increased competition,” bankmecu managing director Damian Walsh says.
“We have a view towards rewarding our customers – our customers are our shareholders. We are taking a long-term view towards the squeeze on our margins.”
That means they are less likely to raise rates out of cycle. Although Walsh – and other smaller banks and credit unions – realise that there may be a necessity to raise rates at some point.
“I would never say no – but we would look to see where we move in terms of where the RBA moves,” Walsh says.
Many of us say that we would switch banks if they increased rates out of cycle. In March, credit union CUA released Auspoll-commissioned research that found 77 per cent of us would change banks if they increased rates independently of the RBA cycle.
Unfortunately the reality is that we don’t, or at least we haven’t been. Customers of the Big Four are very sticky.
“Most people have their mortgages with the four major banks and … they’re not proactive about taking their business elsewhere,” Walsh says.
The removal on exit fees from 1 July 2011 now makes it much easier to change providers if we don’t like the rates, or the service, we’re getting.
There’s no time like the present to move with your feet. Make sure you tell your current provider first though. They may offer you a better deal to keep you.