What Switching Banks Could Cost

So, if you want to protest after the Commonwealth Bank jacked up its variable mortgage rate by jumping ship, what will it cost?

While mortgage exit fees vary around the country, borrowers should expect to pay at least $1000 if they tried to move their variable mortgage to a lender with a better interest rate, say mortgage brokers.

"You wouldn't think you could get from the Commonwealth Bank to another for under $1000," echoice.com.au general manager Rob De Soza said.

But he said that despite the cost of cutting and running, which varied greatly around the country, moving mortgages could be beneficial.

"If I was a Commonwealth customer I would want to see that my loan is the best deal it could do within the Commonwealth first," Mr De Soza said.

Kristy Sheppard of Mortgage Choice said moving a mortgage could save a borrower thousands of dollars if the right research into rates and fees was done first.

"There can be massive savings to be made by refinancing," she said.

She recently heard of one couple saving $30,000 by switching loans, and said now was the time borrowers should look around for better deals.

Citywide Lending agreed, estimating the total cost of moving from the Commonwealth Bank to be $1650 if the loan had been held for less than four years - including an establishment fee at a new lender of around $600.

Consumers were conditioned to believe their money was safest with the big banks, but it was the smaller players who were keeping the market honest.

This week, the Reserve Bank lifted interest rates 0.25 percentage points, surprising consumers who had been expecting rates to be kept on hold. The Commonwealth Bank moved immediately to raise their rate by 0.45 points.

The big banks effectively took turns taking the public perception hit, alternating who would up their rates first.

Citiwide Lending expected other big banks to follow the CBA's example, but not to raise their rates by as much.

Establishment fees for a new basic loan would be on average $600. Normally a professional package an establishment fee would be waived, but an annual fee of between $300 and $400 would be incurred.

The best product available now charged only a $10 monthly fee, but was available only by using a broker.

"Our advice would be to go out there, speak to a broker and don't only say 'I want to move banks' because you are just supporting the cycle".

"Find the best possible deal out there for you, and structure for you, and don't just support the big banks. Moving is not hard at all."

Second tier lenders to look at included Macquarie Group, City Bank, ING and AMP.

Latest NewsWhat Switching Banks Could CostSunday, 09 April 2017

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