Switching Lender to...The Same Lender?

Hi All

I'm currently refinancing from one of the bigger banks (not big 4) to an online lender. I will save approx 0.50% on current PPOR interest rate.

Upon receipt of the final documentation, it would appear that the online lender uses my current bank to secure their loans.

My next step was to speak to my current lender to see if they can match the improved rate, but it sort of seems like they'll be competing with themselves? It seems crazy to discharge the loan, pay a fee etc just to end up with a lower rate with the same bank.

Would appreciate any thoughts re: best course of action. Thanks!

 

U Bank ?

Comparing the bank and its online cheapie is like calling Qantas wanting to fly business and quoting a Virgin fare. Some ways they save $$ are 100% online, no offsets, no broker fees are paid etc. I havent seen how they are at shifting rates up like some other lenders do - except for the recent rate reduction the majors all passed on only about half of.

 

No actually, but one of the like.

 

Same same.

I called Youi to work out why they are cheaper as seen on TV. If I want to drop my pants and take market value of course they are cheaper. Their ads compare market value quotes with other insurers agreed value. I read that from ACCC complaints about similar ads.

 

So better to just go with the online cheapie instead of trying to convince the bank to match it? Seems pointless for them to discharge the loan, that's all.

 

I would call your current bank first. They won't match it - but they are likely to drop your current rate. You can then decide whether or not to continue with the refi.

We always price existing loans before recommending a refinance. There's no point doing all the hard work - getting to settlement and then finding out that the current lender will match or reduce the current rate.

Cheers

Jamie

 

Thanks. Would you conveniently leave out that they are also the lender I am looking to refinance with?

 

I don’t think it matters. You can always leave that out though.

 

Why not tell them what their competition is? Banks do know what competitors are offering, but if they think you're not aware of it, then there's no incentive for them to try to match it.

 

Not quite true.

From the Govt Guarantee scheme website

UBank operates under NAB's banking license and uses its balance sheet, risk management and technology infrastructure. UBank also participates in the Australian government's deposit guarantee scheme

 

You might not quite be reading this in the right context.

UBank has deposit accounts which would be covered under the deposit guarantee scheme. They don't have offset accounts, redraw is not covered under the scheme.

 

On that same vein, I don't think redraws would be covered with any of the majors though would it?

 

Correct. Offset is. Ubank don’t have offset.

 

Yes. Money in redraw with any lender doesn't have the protections. Offset accounts are effectively deposit accounts so they are covered. UBank's savings account isn't an offset account.

The saving grace of the redraw facility is if the money is taken for some reason, you owe less on the loan. Whilst this might mess up some of your future plans, they're not exactly stealing your money.

 

This goes to the heart of the problem with banking competition right now. Online only brands funded by majors, opaque pricing, back book repricing. Imagine if lenders were not allowed to offer cheaper rates to new customers when compared to existing ones. Would that be a good or bad consumer outcome? Discuss.

 

I believe there's some debate about what exactly is defined as a good (or bad) consumer outcome.