Interest rates are on the rise and the big four banks are taking no prisoners. Depending on which financial institution you bank with, your rate could have increased by as much as 10 basis points in the last week. This is despite the Reserve Bank of Australia (RBA) maintaining the cash rate at its last meeting.
Now it seems that the smaller banks are also looking to increase interest rates in the name of covering funding costs. Adelaide and Bendigo banks have followed in the footsteps of the big four and increased their lending rates. This begs the question, what weight do the RBA actually hold? Tasked with keeping the economy on track, surely the RBA should have the final say?
While Wayne Swan may assure consumers that there are alternatives and people should switch if they’re not happy, is this the case? Well, it seems so. In the quarter ending December more than 50,000 customers switched banks. This move was largely driven by aggressive marketing and most customers switched from one of the larger banks to another.
However, since the turn of the year there has been a switch in attitude by the larger banks who now believe that not only can they arbitrarily raise interest rates to whatever they feel, they can also slash jobs in the name of cost cutting. With the profits made by such financial institutions continuing to grow; in fact, it is probably the only sector out with mining that continually posts preposterous profits, how long before customers start to look at moving again?
I listened with interest this morning to Mark Bouris, head of Yellow Brick Road who, unsurprisingly is all for people switching lenders from the big four. However, he made several valid points. 1. Banks are businesses and as such, should be prepared to enjoy the highs while times are good, but also be prepared to wear the costs when the economy slows. Apparently it’s all about averaging. 2. There are 108 building societies and credit unions which are not purely driven by profit and would be happy to have your business in return for a better customer service experience. 3. It costs nothing to look around and 9 times out of 10, if you approach your bank with a view to leaving it, it will match the offer you have been given by another financial institution.
So, if you’re not happy with your bank, do something about it. With the Federal Government and the RBA seemingly unable to do anything to stop banks shafting customers, people power is the only weapon left!