Home Loans shock! A premium priced home loan from a savvy bank!

You don’t have to be an expert to know that you can get a better mortgage rate from a non-bank lender right now.

When Westpac raised its standard variable interest rate by 0.45 percentage points when the offical rise in the cash rate was 0.25 percentage points at the end of last year, it was seen as a public relations disaster. The rate hike, almost twice that of the Reserve Bank, has outraged the Government and will outrage its home-loan customers, especially those who have only just taken out a mortgage with the bank.

But here’s the facts. Last year Wespac snared approaching 30% of all home loan mortgages in Australia. That’s an outstanding volume by any measure. And now it wants to profit on that “in the bank” business .

Do they care if they lose a few of those clients, or have a hard time getting new business through the door? Well yes they do, so maybe they have thought about it.

Prime Minister Kevin Rudd had urged customers to take their business elsewhere, but where and how?

In 2009 the home loan finance game was first time home buyers, and this year it will be margin loans for stocks and shares acquisitions and the return of the property investor. Different blokes, different strokes.

And besides those first home buyers will find that they are stuck with their loans when they read the fine print about deferred application and establishment costs.

It was a beautiful swindle, as the saying goes.

If you are a new home buyer, or a second time homebuyer, that;s a different story. If this is you, don’t even think about a home loan from a major bank this year. Believe it not, the big four got around 90% of the entire mortgage business between them. They don’t need your business, and that’s maybe why you’ll give it to them. For some reason buying a big brand mortgage has a perceived benefit, even though most people think that banks are rip off merchants. Hey I know that premium beer tastes different, but money? I thought a dollar was always a dollar.

And that franchise is not going to disappear over a tilt at increasing profit margins. I know its sounds silly, and I don’t even know why this will happen. Maybe Australians actually like being ripped off by their banks? And lets face it, at least they won’t be going broke, and that is the curse that befell US and UK banks.

As for Westpac, 10 years ago they made a bad mistake, [under the guidance of a US Banker.] They closed branches to cut costs, and looked at going wholesale with money. It didn’t work.

Now they want to open branches and give service at a branch level. And to do that they need bigger margins. Will people pay for that? I reckon they will.

And instead of making lame excuses that no-one will buy about money costing more, why they didn’t share “this service at a branch level spin” as the reason for the increased costs. Maybe the banking business has become so complicated they feel that they have to lie about their motives?

Most people can’t remember, but Westpac used to be the biggest Bank in Australia. Now it looks like it wants to be number one again.

I once saw a sign in a carpenter’s workshop. It read “I don’t know why I went broke, I always had the cheapest prices.”

People don’t want to deal with people who are about to go broke. Its embarrassing and inconvenient, and if its a bank we are talking about, it could sent you broke. So a high profit bank is attractive. Go figure!

Tags: Bank Business, Bank Lender, Different Strokes, Establishment Costs, first home buyers, First time home buyers, Home Loan Finance, Home Loan Mortgages, Kevin Rudd, Margin Loans, Mortgage Business, mortgage rate, New Home Buyer, Property Investor, Public Relations Disaster, Rate Hike, Stocks And Shares, Time Home Buyers, Time Homebuyer, Variable Interest Rate