Ep6: 5 Secrets The Banks Won't Admit

Welcome to the Weekend Investor.

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I'm Max Lending, your industry insider, and we're lifting the lid on the finance market, guiding you on how to cut through the jargon, manage your finances and get investing into the property market.

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Welcome back, loyal listeners.

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And those tuning in for the first time, a warm welcome to our podcast community.

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We've got a very interesting episode for you today.

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I've personally canvassed my elite team of fellow insiders.

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You'll never know who they are across various banks and departments, and they're about to spill the beans with exclusive tips that's probably going to save you thousands.

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But honestly, wait until you hit the last one.

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It is a game changer.

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So you know the drill.

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Get in your comfy undies, get a cup of coffee and let's get stuck into it.

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This year, the mortgage market has been a fierce bank versus bank battleground for the refinance market.

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There was over 800,000 mortgages coming off their low, low fixed rates from COVID and to entice customers to switch bank.

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They offered cash backs, rate discounts, fee waivers, frequent flyer points, you name it.

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But here's the kicker.

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It led to historic lows in profit margins.

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Normally a bank works off only a 1% profit margin.

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So think about it like this.

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If a rate is 6% to you as the customer, then there's about 5% of costs associated with that loan to the bank.

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These costs include.

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The cost of funds, staffing costs, broker costs, et cetera, et cetera.

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The last two years though, the banks have been working off a margin as low as .3 of a percent.

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That is ridiculously low.

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Now that the refinance mortgage wars are coming to an end, it seems like every second week I'm hearing about a bank increasing their rate outside of the RBA rate hike.

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This is because, though, that the banks need to start making some money on these loans.

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Mind you though, these increases are mainly on the new to bank loans, not existing customer loans.

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Now, before we get stuck into the five secrets, I do want to say something.

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That is that the banks are not the enemy.

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We do love to demonize them here in Australia.

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They are the gatekeepers, but they help you step into the housing market.

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The fact is that we want them to be strong and we want them to be successful.

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They underpin the Australian economy.

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Without them, you won't be able to get access to the housing market unless you have like a rich uncle or something that can give you, you know, 100% cash.

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Feel free to share this uncle's details in the comment section.

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Now that's out of the way.

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As the fight for the new business is cooling down, the fight to retain business is starting to heat up.

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Insider secret number one.

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If you are an existing homeowner, you can ask for a home loan rate review by calling up the bank and seeing if they can discount your variable rate.

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But here's the pro tip.

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Timing is everything.

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Avoid the end of the month or the end of the year.

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Reason being each bank has a retention team.

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They are given a dollar figure target to hit every month, every quarter and every year.

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So you are best to call up at the start of every month, quarter or half year.

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That's when their targets reset.

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If not, you run the risk of them already hitting their target for that period and not really being incentivised to offer you the best rate to stay.

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When you ask for a rate discount though, please come armed with information and do your research.

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All banks have an algorithm.

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That's what's called a propensity to leave factor that's built into these algorithms.

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If you quote another bank's rate that's better than yours, then you're seen to have a higher chance of actually leaving and you know, increasing your chance of getting a better rate review.

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If you have a fixed rate though, it's less likely that you're going to leave because they know you're stuck and you can't really leave until that fix matures.

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So wait until just before that fixed rate is about to mature.

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Then give him a call and ask for that rate review.

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Take note though, you can ask for a pricing request once every six months, but keep in mind, don't expect to get the new to bank rate.

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You can expect to get within 10 basis points or 20 basis points of the new to bank customer.

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So don't get upset at that poor guy on the other side of the phone.

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That you're about to scream at because new to bank customers are getting a lower rate than you are.

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That's just the nature of the model.

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Secret #2, follow through with your threat to leave.

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It's a bold move, I know, but it's often sparked the best rates.

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Now before you go, oh, but how do I do that, Max?

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You need to send in what's called a mortgage discharge form.

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Banks love to hide this form.

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You probably will need to call them to find it, or you're going to need to get a cybersecurity expert out onto their website to figure out where they're hiding it.

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If you fill out this form and send it in, you're then what's called an active lead and it's sent through to their retention team.

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This usually leads to them making.

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Best offer to keep you as a client because they know there's a very high chance now that you are actually going to leave.

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Keep in mind though, you can really only do this trick once.

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After that you become the boy who cries wolf.

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Secret #3 fee waivers, fees, the bane of our existence.

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If you have an offset account, it will normally have an annual fee associated with it.

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Or when you are actually getting the loan, there's things like the settlement fee or the application fee.

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Everyone hates fees.

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Ask for that fee to be waived.

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There is no harm in trying.

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Normally the bank staff who are customer facing get an allowance each month to spend on fee waivers.

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The smaller the fee, the easier it is to get it waived.

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Again, though, come armed with information.

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Quote that another bank isn't charging that fee.

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Every staff member, when they write off a fee, they have to write down in the system why they're doing this.

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So help them out.

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You know, prompt them with the keywords that they might miss, that they have a potential customer or a potential competitor that is going to steal their client.

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Make it up if you have to.

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They're not going to actually check if that other bank has got the fee waiver or not again.

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Ask for the fee waiver at the start of a month instead of the end of the month, because the allowance is reset at the start of every month.

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Secret #4 Avoid December.

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Avoid December like it's the plague.

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It's a chaotic month.

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You might end up actually missing settlement.

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Banks are busier than Santa Claus during this period.

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The delays could actually cost you also.

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There's two reasons for this.

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For one, people are insane, and two, people take a lot of holidays during this period.

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The bank's staff count is actually lower and everyone wants to settle before Christmas.

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I'm sure you can relate here, but for some reason in December, everyone rushes around trying to get everything done before Christmas Day, and they act like that.

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If it's not done before then, the world is going to end.

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I'm no Grinch.

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But I look forward to the self-imposed stress that a Karen puts themselves under.

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Every December I'm told that I've ruined someone's Christmas.

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So if you're a Karen out there, pull your head in and get yourself sorted.

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On a serious note though, if you do purchase a house and it has to settle in December, just be careful because you could actually miss settlement day because it is so busy.

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If this happens, you could be exposed potential late settlement fees from the seller if the bank.

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Does actually miss settlement, and it's the bank or the solicitor's fault.

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You may have a good chance of getting that fee reimbursed.

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That's if it's the bank's fault.

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You will need to show proof that the fee was actually charged.

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But if the delay is yours, example, you didn't sign the loan documents quick enough, or you didn't supply a required document quick enough, then you're not going to have any leg to stand on.

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And the lucky last secret, secret #5, the secret website.

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If you've spent any time on a bank's website is a labyrinth of confusion.

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Have you ever tried searching for a particular bank's home loan product and their associated rates?

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It's easier to learn a goddamn other language than it is to find what you're looking for, and they do this on purpose.

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They actually don't want to make it easy for you to find it because it's going to be easier for you then to compare their rate to other banks.

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But don't fret, Max has got your back.

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I want you to go to Google, type the bank's name and then type the words broker portal.

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You can then access a treasure trove of mortgage broker specific pages.

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Most banks will have a hidden website just for the mortgage brokers.

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All the information about the rates will be nicely laid out, all in an easy to read and quickly digestible layout.

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A lot of access to these pages will probably be behind a lock screen of some sorts, but click around because you will be surprised at what information is available.

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There you have it, 5 secrets the banks won't admit to.

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Which one was your favourite?

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If that's not insider knowledge, I'm not sure what will be.

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Now remember, when asking for a discount or a fee waiver, it can be stressful, I know.

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But there's one rule you need to remember.

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Be nice.

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You never know where it's going to get you.

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There's no need to yell or get upset at the person at the other end of that phone.

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A smile goes a lot further than a frown.

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Thank you so much, my fellow weekenders.

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You stay classy and I'll see you at the next one.

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If you have a question that you would like answered on the show about budgeting, mortgages or finance, then drop us a line either via our socials, e-mail or website.

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Details available in the show notes.

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Any opinions and views expressed in this program are just that opinions.

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All information is general in nature and should not be seen as financial, economic, legal, investment, accounting or tax advice.

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This program makes no representation or warranty as to the accuracy or completeness of any information contained in this program.

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You should consult a professional advisor in relation to your own personal circumstances.