More home owners making the switch to save a bundle

Figures from the Australian Bureau of Statistics show the number of Australians switching their home loans to other financial institutions has increased by 16 per cent in the past financial year, meaning more home owners are looking for a better deal to save money on their mortgage. 

For the month of September, leading financial institution Community CPS Australia, saw the number of refinanced loans almost double when compared to the same period last year. Its local subsidiary, Companion Credit Union saw a 50 per cent increase in the number of people bringing their home loans across from another lender.

Community CPS’ Hunter-based general manager of distribution Ray O’Brien predicts the trend towards switching will continue, particularly following the Federal Government’s new legislation on switching financial institutions from 1 July 2012.

“The new legislation gives homeowners the ability to change financial institution without having to go back and forth with their current provider. The new provider now arranges the switch, making it really simple to make the move,” Mr O’Brien said.

“We will see more and more people looking for alternative products as home loan packages become more competitive, which actually works in the consumers’ favour,” he said.

“People can save thousands by switching providers, for example, if they can find a home loan product that reduces their interest rate from 6.69 per cent to 6.49 per cent they could save up to $450 a year – based on a standard mortgage of $300,000. This would be a saving of more than $11,000 over the course of a 25 year loan.”

Mr O’Brien recommends the following to those who are considering a switch:

1.    Assess – is your current home loan still the best solution for you? Has your lifestyle changed since you first took out the loan and what loan features are most important?
2.    Research – see what other financial institutions – including credit unions and building societies – are offering and which package meets your needs.
3.    Understand your existing terms – find out whether you will have to pay any exit fees and if so, will this be worth it in the long term.
4.    Speak to the professionals – after doing your own research, it’s a good idea to talk to your existing and potential provider to get the best possible product.

Shane and Bronwyn Townsend of East Maitland switched their home loan from one of the major banks to Companion in the middle of this year.

“I already had an investment loan and a car loan with Companion, and after seeing how competitive the rates were, Bronwyn and I decided it was worth switching,” Shane said.

“We are now paying less interest and are saving around $200 a month. In addition, the flexibility of our new mortgage deal means we’ll be able to pay off our home loan quicker.

“Companion made the switching process extremely simple and fast. Their customer service was outstanding, and I felt like a valued member rather than just another number. I would definitely recommend Australians assess their mortgages and consider switching if they’re not happy,” he said.