A new report by The Australia Institute shows the value of mutual financial institutions and co-operatives more broadly writes our CEO Don Magin. The report found that people would save $76, 417 over the life of an average mortgage and reduce their repayment period by three years if they switched from a 'big four' bank to a mutually owned bank, credit union or building society.
I welcome the report for highlighting the savings people can make by banking with customer owned financial institutions and the role they play in providing competition to the major banks for the benefit of Australians. Building societies, credit unions and mutual banks are able to offer lower rates, lower fees, better service and support for their local community because they don’t have the competing interests of customers and shareholder returns.
As the banks start to announce their profit results this week, consumers should have a look at their home loan or savings accounts to see if they can get a better deal. Switching a home loan to a building society or credit union can save thousands of dollars and it is easier to do than people think.
Mutual financial institutions are providing this much needed competition despite not being on a level playing field with the major banks. This is another report showing the benefit of building societies and credit unions as a fifth pillar in banking, a pillar which needs to be on the same level footing as the other four pillars. That is why we need an independent inquiry into the Australian banking sector, something which I have blogged about previously.
At the time of writing this, The Greater’s standard variable home loan rate is 6.25% p.a (comparison rate of 6.31% p.a.) It is 46 points (0.46%) lower than Westpac’s and 38 points (0.38%) lower than the average of the Big Four’s rates. The Greater’s Basic Home Loan rate of 5.89% p.a. (comparison rate of 5.95% p.a.) is lower than the major banks’ rates. Greater customers with a Standard Variable Home Loan are paying $90 a month ($1,080 a year) less than Westpac customers. Greater customers with a Basic Home Loan are paying $47 a month ($564 a year) less than Commonwealth Bank customers. Last week The Greater further cut its fixed rates for its Ultimate Home Loan taking its one year fixed rate to below five per cent (4.99 per cent), the lowest home loan rate in Australia. Its three year and five year rates for that loan are 5.34 per cent and 5.54 per cent respectively.
Table 1: Comparison of The Greater's and the major banks' standard and basic home loan rates
What is preventing you from switching from a major bank to a building society, credit union or mutual bank? Please share your thoughts below.