How we all make more money for our banks

It is an unfortunate fact, that in Australia we're more often than not, happy with blissful ignorance.

Bank - undoubtedly a four letter word when it comes to the opinions of most Australians.

No one likes having to have a home loan, or deal with a bank, but it's part of the deal of life. Most of us don't have a spare $500k to purchase a house, so we're at the mercy of the lenders, and their interest rates and fees.

While the lender market has changed significantly in the last decade, with and explosion of different lenders now available, the reality is people are more complacent than ever.

We don't like getting ripped of by our bank - I've heard many a conversation around the BBQ about high interest rates and fees and charges. It's also great fodder in the media.

But that doesn't seem to equate to action.

The reality is, the stats show that once we get a mortgage, we only really think about it when we are forced to make a change. Australian's are very much apathetic when it comes to action regarding our mortgages. We'll declare how badly we're being ripped off, but will very rarely do anything about it.

And that's how the banks like it.

Remember that time the bank called you to let you know they had checked your mortgage and realised you weren't on the lowest rate?

Of course you don't - because that never happens.

The banking model for mortgages is set and forget. They know the majority of people just keep paying every month, and while they may complain to themselves, will rarely do anything.

We all make the banks more money by doing this.

There are some who do take action, contacting their lender to ask why they've been charging them a higher rate than what they just advertised on TV.

In those cases the bank may be willing to talk about your fees and rates and may offer a discount or alike to satisfy, knowing that you'll again likely sit on your mortgage for another 5 or 10 years without a peep.

I've often had client's in this situation, so I usually advise them to ask for a refund - if the bank was quite happy charging you too much interest for 2, 3 or 10 years, surely they should refund it? Which of course they don't.

Mortgage payers should never get caught in that trap.

Today, on average, 1 out of every 2 home loans is provided through the services of a mortgage broker. And that's growing every year.

While there are many reasons why you should use a broker rather than go to direct to a bank, such as being able to compare 1000s of home loans across a all lenders saving you considerable time, a broker's best benefit is keeping the lender honest.

A good broker should be reviewing your loan behind the scenes or even with you, at least once a year. They can identify if the product still meets your needs and your future goals, but most importantly, that your not being ripped off!

Because from the lenders position, their customer is the broker. The broker, who in turn has 100s of their own customers, has considerable buying power when it comes to lenders. Unlike a customer with one or two loans, the broker may have hundreds and the lenders always wants the biggest piece of that pie.

So what's the moral of this story, Banks are lazy and very good at making money. They will happily charge whatever they can knowing most won't do anything about it. So to make sure you're not getting ripped off, and you're actually getting a service for the monthly interest you pay, always use a mortgage broker.

Actually, correct that - always use Local Mortgage Services.

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