How to get revenge on banks who make billions but still hike your interest rates

AUSTRALIA’S major banks post multibillion-dollar profits and employ bosses who take home millions in performance bonuses.

But while their reputations have taken a battering in recent months thanks to a Royal Commission which uncovered a wealth of dodgy practices, their arrogance continues unabated.

Commbank and ANZ today joined Westpac in hiking mortgage interest rates out of the usual Reserve Bank cycle.

Labor slammed the move, saying banks are “taking advantage” while the government remains distracted by its leadership coup.

“Australians have yet another reason to be angry and frustrated with the big banks after more have announced out-of-cycle rate hikes today,” Opposition spokesman for finance Jim Chalmers said.

“Middle Australia is already struggling to make ends meet, and customers of the big banks will be considering other option

Australians on social media agreed. “Heartless!” was how one twitter user described the CBA move and by midafternoon Facebook was flooded with furious customers who couldn’t believe the nerve of rate rises in the shadow of the Royal Commission.

The impact of the hikes is significant for an Australian economy in which households are already holding high levels of debt.

“A lot of households are in precarious financial positions, experiencing mortgage stress, where an increase in interest rates can have a big impact,” Sally Tindall, research director at RateCity.com.au, said.

After initially pleading with the banks not to raise rates, Prime Minister Scott Morrison last week told customers not happy with rises to look elswehere.

“Don’t do it — they already don’t like you very much,” he said about potential rates rises and then a few days later urged people to vote with their feet.

“If you don’t like what Westpac’s done, go to another bank,” he said.

Experts agree the best revenge bank customers can take is to go elsewhere, with many lenders still willing to be competitive to nab your business.

OUT OF POCKET

ANZ and the Commonwealth Bank both increased their lending rates by 16 and 15 basis points respectively today, higher than the 14 basis point hike from Westpac last week.

This brings ANZ’s standard variable owner-occupier rate to 5.36 per cent, with Commonwealth Bank’s rate slightly higher at 5.37 per cent. Westpac’s new rate is 5.38 per cent.

Based on the average Aussie home loan size of $396,000, mortgage customers will be slugged between $414 and $473 per year in additional repayments.

Graham Cooke is the insights manager at financial comparison website finder.com.au and expects National Australia Bank to follow suit and raise their rates by the end of the week.

“Since Westpac moved interest rates north last week, it was inevitable the other big banks would follow suit — the big surprise was that it took over a week,” Mr Cooke said.

“We’ve also seen smaller lenders such as Adelaide Bank and Suncorp jump on board in the last few days, and many others will be taking this opportunity to increase rates in the next few days.”

PLAYING YOU FOR FOOLS

John Durie, business columnist for The Australian, wrote that banks worry about profits first and second, and customers third.

“Today’s move shows the big bank oligopoly is alive and well and, contrary to popular wisdom, the royal commission hasn’t changed culture to the extent that customers may gain some boost,” he said.

Analysis in Bloomberg recently found that banks are unlikely to change due to disgrace, but defection.

Or put simply, if people vote with their feet and walk away from their banks, they’ll have no choice but to stop taking them for granted.

Some 60 per cent of owner-occupier home loans in Australia are with the Big Four banks.

Despite the Royal Commission, which has seen shock after shock emerge, their share of the mortgage market has fallen just one per cent.

“The reasons for this aren’t particularly mysterious,” Bloomberg wrote. “Incumbency has its benefits, in terms of branding, branch presence, network effects, and funds to squeeze out the competition — and Australia’s banks have taken full advantage.”

TIME TO GET ANGRY

Banks argue that funding costs have risen internationally, forcing their hand to recoup costs locally from customers. But people are unlikely to feel sympathy — and rightly so.

Research shows that in recent times of unfair increases to rates, out of step with the Reserve Bank, consumers have been furious.

They’ve vented to friends, family, their banks, mortgage brokers and politicians … and yet they’ve done nothing about it.

Experts say it’s time to break the cycle and use your anger to send a message to the banks.

“This could be a great opportunity to shop around,” Mr Cooke said.

“The big banks will generally discount off these rates, and smaller lenders are still offering rates below four per cent — so don’t take these rate hikes for granted.”

As a first step, phone your existing lender and express your disappointment and remind them of your loyalty as a customer, he said.

“If you’re in good standing with your bank, ask for a discount. If they don’t give you one, shop around.”

The Reserve Bank has hinted at increases to the official cash rate next year — which you can be sure lenders will pass on in full.

So, Mr Cooke said it could be worth fixing part or all of your mortgage interest rate while you’re negotiating a cheaper one.

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