survey from ME revealed 94% of Australians think banks don’t act in their best
interest. 95% agree banks sometimes put profits before customers and 92%
believe banks sell products and services inappropriate to customers.
McPhee, ME CEO, coined the phrase ‘bank-xiety’ as a term to describe these
findings of worry, nervousness and distrust towards banks.
Despite this, only 14% of respondents have done something about this and have switched or are in the process of switching to a bank they trust.
According to Elizabeth Knight in an article in a recent SMH, “The unnecessarily high cost of price discovery is likely a key reason why 70 per cent of borrowers surveyed by one bank said they had obtained just one quote before taking out their residential mortgage, the ACCC report said.” If that is you, why not let me help you save a bundle by getting the best rate from the most hungry lender. By the way, it is not likely to be one of the big banks.
According to AustralianBroker, 33% of Australians are failing to put in the effort and seek out better home loan deals despite slow wage growth and piling levels of household debt. Apathy and the hassle of switching lenders seem to be the main reasons, but it’s very easy to ring your broker and let him or her save you the hassle and potentially save you a lot of money.
When my clients ask about the potential for a substantial drop in prices for residential real estate in Sydney, I’ve often referred to the consistent message from the major banks’ economists and others. That is that supply and demand are pretty much in balance in all capital cities except Sydney, where we have a gross under-supply that is likely to persist well into next year.
I now have reasons to question this position. Bank economists are very unlikely to ‘talk down’ the market, because 60% of their balance sheets are bricks and mortar. And, in my previous post, I included graphs provided by Stockland, who also have vested interest in the rising market. The other reason is that property monitoring experts are projecting a glut of units due to the many high-rise developments now under construction. They do, however, also project a continuing under-supply in standalone housing.
P.S. I noticed that the 5-year swap rate increased by a much wider margin than in the past. On Friday, the 30th, it was 1.87%, and on Friday, the 7th, it was 2.01%. Could this be a turning point?
Friends, clients, and prospects often ask if we’re nearing or at the top of this cycle in the residential property market. My replies have been consistently the same – probably not. Bank economists over the last 12-18 months have stated that the Sydney market is grossly under-supplied and will likely remain so well into 2017. So, prices continue to rise, aided in part by the six-year plus downward trend in interest rates.
An article in the weekend Fin Rev provides further evidence, the most interesting part being the graphs based on data from Stockland. If they’re anything close to accurate, those who want to buy but think that prices will fall in the next year or two, may experience an expensive regret.
During the Ku-ring-gai Chase Fun Run for charity yesterday, I talked to a prominent local Real Estate Agent. When I suggested that he must be ‘raking it in’, his reply was the same as others that I’ve talked with recently. They don’t have enough ‘stock’. So, as long as demand continues to outpace supply, prices will continue to rise. As my stockbroker uncle used to say, a bull market “climbs the wall of worry”.
When clients ask me about getting a better deal on their mortgage rate, I advise them about what is achievable from others and suggest that they give their bank a subtle ultimatum, in which the underlying message is, “Match the current market rate for my situation or I’m leaving.” While I’m happy to make it as painless as possible to switch banks, far less time and effort is required by ‘demanding’ that your bank do the right thing and reward your loyalty.
I, too, was among the vast majority that expect their bank to ‘look after me’ as rates fall. But, the headline rates are only the starting point, because good brokers know that securing the best available discount (sometimes well over 1%) to the standard variable rate is the real objective. Don’t expect your local bank branch office to ring you when available discounts are increased, because branch personnel have incentives to withhold discounts. That’s where the ‘demand’ can sometimes yield the desired result, but only if your branch can’t afford to lose you. But, there’s an even better way.
The most powerful department in most banks is the one responsible for client retention. So, ring me to learn what is reasonable to expect, then find the Retention Department in your bank to request an increased discount. If they refuse, I’ll help you switch.
I had coffee with a banker the other day to discuss his ‘appetite’ for a Goodwill Loan for one of my Radiologist clients who is negotiating the purchase of shares in an established Medical Imaging business. He very clearly identified the cycle that all banks follow, although they’re rarely in sync.
The banks shift back and forth between loose and tight credit policies. His bank is currently in a tightening phase for Goodwill Loans due to a growing number of bad and doubtful debts, mainly among Dentists. It reminded me of my experience at GE Healthcare where the ‘pendulum’ swung back and forth between a focus on market share and a focus on margin.
Monitoring the banks’ fluctuating appetites for the various asset classes is one of the core competencies of a good finance broker. So, save yourself a lot of time and hassle by engaging Sooner Solutions to source the right facility and lender for Medical Equipment Finance, Commercial or Residential Mortgages, Loans for Motor Vehicles, and Goodwill Loans.