Loan switch


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After thinking that switching home loan providers would be too hard and not worth the trouble, we convinced Jason and Karen Rout to give it a go.

Now they're laughing because making the chance wasn't just simple it's going to save them a small fortune.

"Switching mortgages hasn't been, we haven't thought about it," said Karen Rout when we first met her and husband Jason two weeks ago.

"We don't spend on luxuries, there's no luxuries, if we, we're coming into winter now and everything has got to be lay-buy or budgeted for; if Kasey my daughter rips pants, we have to sew it up or plan when we're going to buy things," Karen said.

Jason and Karen both work to provide for their children Charlie (3) and Kasey (11). Still, they are barely surviving.

"Almost on a week to week basis, pay to pay," Jason said.

Enter Damien Smith, CEO of Ratecity ( to show the Routs how to go about finding a better mortgage.

"So let's start with your current loan, so currently you've got a $320,000 mortgage, you're paying 6.76% so that's not a bad rate," Damien Smith told the couple.

"A home loan's a big deal and too many of us don't look at it until it's too late," Smith said.

Is it too late for Jason and Karen? They moved into their first fully-brought home in Sydney's west last year. They were happy with their lender Westpac until...

"…they were rude to us so Jas' and I did talk about switching," Karen said.

With Damien's help, the Routs learned how to find and compare loans online and the results were surprising.

"There's over 115 lenders in the market so who do you choose?" asked Mitchell Watson from Canstar (

"If you're paying 7% or more on your home loan, you are paying too much," Watson said, adding competition has never been so fierce in the home lending market.

Year No. Of Owner Occupied Loans Settled No. Of Owner Occupied Loans Refinanced Percent of Loans Refinanced
2000 524,171 115,233 21.98%
2001 606,404 133,931 22.09%
2002 625,514 157,727 25.22%
2003 677,277 197,245 29.12%
2004 604,183 185,628 30.72%
2005 671,280 211,209 31.46%
2006 721,105 228,790 31.73%
2007 729,922 221,830 30.39%
2008 600,792 199,844 33.26%
2009 668,356 178,511 26.71%
2010 525,299 158,133 30.10%
2011 536,515 181,888 33.90%
2012* 83,753 30,120 35.96%
Source: with analysis undertaken by CANSTAR

  • Data is only available to February 2012

Fifteen years ago of all the home loans settled 22% were refinanced loans; in other words they were switched between lenders. Ten years ago, it was about the same, at 23%. Then five years ago it jumped to 30% of loans signed were actually swapped. Today it's over a third (35.96%).

"You've actually got people who are hungry for your business and say, you know what? Our big point of difference is that we're going to go in with a low interest rate," Smith said.

"The hard part was contacting them, they all have lingo and so some of them were rude, some I didn't understand what they were saying," Karen said.

After narrowing down their choices Kate and Jason spoke with three small lenders.

"(What sorts of odd questions were you asked?) Are we over 18? Yeah and how many dogs and cats do you have? Do we live in Australia?" The Routs said.

The latest CUA Mortgage Survey reveals 81% of borrowers would go to another lender, or at least consider it, to get a better interest rate on their home loan. Karen and Jason now wonder why didn't ditch their bank before.

"You get stuck in your comfort zone and you don't realise that you can actually change from bank to bank because you don't have to pay the exit fees… a lot of people just stay with who they are," Jason said.

After two weeks, the Routs have re-routed away from Westpac, where they paid 6.76% interest, to online lender . (

"He's got us a rate of 6.40%," Karen said. "We're going to bring it down 30 years to just over 20 years so we save $104,568!"

"Wow, the interest is massive, isn't it? I hate banks!" Jason said.

"(How long did it take you?) About two hours - yeah, about two hours," Jason said.

There are no exit fees since the government banned them from July last year but what about other setup and administration fees?

"I think it was about $215 - that was including admin and everything like that," Karen said.

"Definitely give it a try," Jason said. "It's worth the time and effort to get on the computer or laptop and give it a try."

Karen added, "Every financial year when we get our tax cheque, we've got the money, we're going to go into Ratecity - we're going to change... no more banks that treat us like pizza hut!"

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