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Is it really worth it to change banks?
It is common knowledge that most lenders will provide a discount for larger loans. As with anything, if you purchase in bulk, you should be entitled to larger discounts. Generally, the big 4 banks will offer you something in the range of 0.70% off the standard variable for a loan size above $250,000. Recently, a Central Choice broker negotiated a massive 1.0% rate discount off the standard variable rate from one of the big 4 Australian banks! The total size of the loans was approximately $950,000. As the standard discount is only 0.70% if the client had walked directly in the bank, this saved the client an additional 0.30% off the interest rate, representing a saving of approximately $2,850 per year! A commonly asked question is that "How can a broker receive a cheaper rate than going to the bank direct? Don't the banks have to pay the brokers a commission as well?" This is the story that many banks will have you believe, however it is also true that the cost of sourcing a loan through a bank includes: A commonly asked question is that "How can a broker receive a cheaper rate than going to the bank direct? Don't the banks have to pay the brokers a commission as well?" This is the story that many banks will have you believe, however it is also true that the cost of sourcing a loan through a bank includes:
In addition to this, it is useful to know how your bank staff gets paid. They will get paid not only on "asset or lending growth" which is a fancy name for the number or value of loans written, but they also achieve bonuses based on "revenue per client." What this actually means is that they are more likely to receive their quarterly/annual bonuses if they are able to earn more money off you by charging you a higher rate of interest!
On the other hand, there is only one cost that the lender needs to pay for loans introduced through brokers, and that is a performance based commission - that is, the broker will only be paid when the bank is guaranteed to be making money when the loan settles. It makes no difference to our brokers (commission wise) what rate is delivered to you because our commission remains the same. Therefore, we will always work our hardest to get the lowest interest rate possible for our clients, because our business depends on our clients telling their family and friends about our services because we were able to negotiate with them a rate that they would otherwise not be able to obtain themselves. Please note however that these loans are discounted on a client-by-client basis so make sure you talk to a Central Choice finance specialist, who will explain all of the above to you and give you the best chance to negotiate the lowest rate!
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