ME Redraw

I think the abject lesson here is to stick with the majors for the most part. Less likely to try something that doesn't go down well with customers due to publicity, having more to lose etc.

 

Less likely to happen to big 4 with all media, government and public scrutiny.
I've said a million times I'd never put my lending with these second type/smaller lending institutions. The Big 4 ould be crucified over something like this.
Better the devil you know, even if it does cost me a couple of extra points.
I learnt my lesson years ago after placing clients with RAMS who were then taken over by RHG.
Once bitten twice shy

 

I’ve been with them for 20 years. They are currently charging me 3.68 on my P & I owner occupied home. I spoke with retention team in Feb and they wouldn’t do better. (I was paying more but they passed on the last interest rate drop). I’m getting penalised as it’s only a small loan - about 10% of the property value. I think it’s really rude! I used to love them but not anymore. They know it’s not worth the fees for me to leave.

 

That's appauling treatment. They only reason why they think they can keep you probably because your loan is quite small and the cost of moving may outweigh the benefit.

I'm sure you're aware that there's several lenders offering rebates at the moment. Most only offer rebates for loans of $250k or more, but there are some that are offering a decent amount for loans over $150k.

 

Thanks! I did look around a bit! Loan is only $64,000. I may be selling a Qld property later this year which will clear this loan depending on Covid. I have one other stand alone 80% IP loan with them that fixed rate expires in Feb next year and I’ll definitely be leaving for good.

 

Is this the first time the redraw v offset argument has come to fruition?

If so Broker’s will be loving this! It’s one thing to say “redraw is the banks money they COULD technically cease....” which is now changed to “redraw is the banks money, during Covid19 they DID remove access leaving customers with no savings”....
The explanation and argument becomes a hell of a lot easier.

 

Unfortunately I can't think of a lender offering any sort of rebate for loans below $150k. Moving lenders would likely cost at least $700 and the benefit of a 1% reduction in rate would only be $640/yr in interest. The cost-benefit equation doesn't really add up just on the interest rate alone, you'd need a better reason to refinance.

The best I can suggest is to see if there's an alternative product they can put you on, otherwise simply paying the loan off in full is probably going to be the best option.

 

I have one of our term deposits with ME. As a protest against such behaviour I’ll move it to another institution when it matures in a few weeks time. That’ll teach em.

 

Yes there other options all worked out to no advantage with yearly fees for lower rates. I’m paying less with Nab for investor loans . Yes hoping to just pay it out then move the other ME Bank loan to a different bank so all my eggs aren’t in one basket.

 

I don't think it's the first time, most brokers on here have been saying this about redraw vs offset for a long time but yes it is certainly easier to explain while it's currently happening.
It's quite likely similar things happened during the GFC and prior.

 

ME Bank posted an apology on Facebook an hour ago. Lots of angry customers.

We’re sorry.

Over the past week we made a change to the redraw feature on one of our home loan products. This change only impacted customers of one of our older home loan products, but we can't forget that behind each loan sits a loyal customer. A customer that has come to us because of the bank that we are – a bank that was formed to help our customers get ahead.

This change was made with the best of intentions, when it became clear to us that by not reducing the available redraw on these home loans over time, some customers could overuse their redraw to a point where they could fall behind their original repayment schedule. This could put those customers at risk of not meeting their repayment commitments, potentially leaving them open to financial hardship at the end of the loan term.

No money was removed from customers’ accounts and all the money customers have paid to their loan remains within their loan. But the redraw limit needed to be adjusted down so customers didn’t inadvertently increase their outstanding balance to a point it would be difficult to repay in the time remaining on their home loan.

We still stand by that decision, but the job we did to explain a complex product, what we were doing and why we were doing it, was simply not good enough. We should have worked with customers to understand any individual impacts.

We should also have communicated better and not at a time when call volumes have made it hard for you to contact us.
This goes against everything we believe in and aspire to be. So, over the next week we’re going to do our best to help our customers:

- We’re increasing our service team to have these conversations with customers
- We’re rearranging financing at the Bank’s cost for customers whose redraw limits have been reduced
- We’re offering customers access to the three- and six-month repayment holidays if that helps
- Where customers have individual needs, we will do all we can to help those individual circumstances

Finally, we know that everyone has a lot on their plate at the moment with everything going on in the world, and we never wanted to add to that.

Please accept our most heartfelt apology and believe that we are 100% committed to helping all affected customers as quickly and as effectively as we can.

If customers need assistance, they can call ME on 13 15 63 (8am-8pm Monday to Friday, 9am-5pm Saturday AEST).

 

Can the brokers explain this?

redrawing results in a larger outstanding loan balance. The loan term doesnt change so the monthly repayments should increase.

why would this result in the borrower becoming behind on repayments? It almost reads like ‘you might become unable to make the increased payments’.

 

" when it became clear to us that by not reducing the available redraw on these home loans over time, some customers could overuse their redraw to a point where they could fall behind their original repayment schedule. '

They could only know this if they did a reassessment on the borrowers. Unlikely to have happened I think. Misleading statement perhaps deceptive even.

 

Perhaps this older product they were in allowed for repayments to be reduced as the loan was paid down. Redrawing money would therefore have resulted in higher repayments with the potential for some to not be able to meet the minimum repayments.

 

ME could actually be ahead of other lenders. If values were to fall redraws calcs could impact more. Even offsets if lenders sought to use offsets as a first charge

Arguably ME probably overlooked things until too late and poorly communicated

Eg Fred is 65 with full redraw on his loan which is 74% lvr. Should he have this capacity if the value falls say 20%

 

has there been any instance of lenders pulling redraws for mining town, perth properties that have fallen in value?

this reads like the lender is somehow unable to recast repayments to take redraws into account.

 

https://www.smh.com.au/business/ban...ver-me-bank-redraw-moves-20200506-p54qbh.html

If they are forced to reinstate redraws, what would be the first thing those customers do? Own goal.

 

Brilliant!

Clause 68 of the National Credit Code of the National Consumer Credit Protection Act states:

68 Other unilateral changes by credit provider

(1) A credit provider must not exercise a power under a credit contract, mortgage or guarantee to unilaterally change its terms without giving to the other party, not less than 20 days before the change takes effect, written notice setting out:

(a) particulars of the change in the terms of the credit contract, mortgage or guarantee; and

(b) any information required by the regulations.