Time to switch?
Two-thirds of mortgage customers say they’re not getting the best deal from their bank
- 65% of Australians want to be rewarded with lower fees and better rates for being loyal
- Interest rates and discounts more important than ever before in the mortgage war
- Almost a third of those who searched for information about mortgages gave up citing ‘choice overload’ and complex information
Monday, 8 October 2012 — Only a third of Australian mortgage holders believe they are getting the best possible deal from their bank, with 66% of people saying they think there are better deals available, according to new research by EY.
The Mortgages survey, the second to be released as part of EY’s Customer Experience Series, confirmed that in the current environment interest rates and pursuing discounts on banking products were top of mind for mortgage customers.
EY Customer Leader, Advisory, John Rolland said: “With more of our money being used to pay down debt, Australian homeowners are actively looking at ways to cut costs.
“A mortgage is the biggest debt most people will take on in their entire lives and given increasing financial pressures, it makes sense that saving money is people’s first consideration,” Mr Rolland said.
The survey revealed if a provider’s rates and fees were perceived as too high people would simply move on to considering another lender or drop out of the mortgages race altogether.
“In the past consumers would take a range of things into consideration when choosing a bank such as a strong relationship with their branch manager, and generally would be grateful to whoever would give them a loan.
“Now less than a third of people who started the mortgage or switching process go to their current bank as a first point-of-call,” Mr Rolland said.
Key findings of the Customer Experience Mortgages survey include:
- When applying for a mortgage, a third of customers give up at the ‘information gathering’ stage because of ‘too much choice’ and a lack of simple and clear information
- 60% of people who initiated the mortgage application process ended up finalising it and getting a mortgage, the remainder dropped off along the way
- 80% of customers who embarked on the mortgage or switching process started without involving a broker or third party.
Mr Rolland said over the past few years banks had made significant improvements in the automation of their mortgage processes, with the research finding that once consumers were in the thick of the process most continued on to get a mortgage.
“However, our research tells us is that it is the very first step when people are looking for information about a mortgage that is the biggest barrier.
“It sounds simple enough, but banks need to focus their efforts on that initial step - when customers first put their mortgage feelers out. They need to ensure the information available via all their channels is in plain English and provides real comparisons for customers, in other words it doesn’t require high levels of financial literacy to make sense of it,” Mr Rolland said.
The survey also draws upon the findings of a 20-year Australian social values study, AustraliaSCAN1 which identifies current key social trends and measures cultural change.
“We know Australians are time poor. They feel a lack of control over their lives and, as such, don’t like complex decision-making. This means they default to the simplest tools that help them in their everyday decisions.
“While choice is obviously a good thing for consumers, there is such a thing as ‘choice overload’ – even in banking when competition is a good thing,” Mr Rolland added.
“It’s a sign of our times that people looking for a mortgage are feeling overwhelmed by the vast array of mortgage products as well as the number of mortgage lenders, and don’t know where to start.
“While switching is not altogether common at present, the stakes are now higher and the potential pay-off for customers greater, so we will see more and more Australians come around to putting in the effort to switch,” Mr Rolland said.
The survey found that more than three quarters of people who were looking for a mortgage had no firm idea about which lender they wanted to switch to.
“This means the playing field is wide open for lenders to take advantage of consumers’ current willingness to change lenders,” Mr Rolland said.
“There is no doubt competition is continuing to intensify especially between traditional and smaller lenders and as a result of new, non-traditional lenders entering the market. The winners will be the ones that make things simpler, offer innovative, tailored banking solutions that better meet customer needs, take a more proactive approach to their relationships, and reward loyalty.”
Mr Rolland said the vast majority of customers want to be rewarded for sticking with one banking brand.
“This is the intuitive next step for banking in an era of heightened consumer discernment, and has been on the cards for some time. Some banks are already doing this and quite innovatively, others on the other hand are more than a few steps behind,” Mr Rolland said.
“Customers are looking for products that are more tailored to their individual circumstances and are willing to provide more personal information to banks to ensure products match their needs. This also goes for services - customers want to do their banking via their channel of choice and won’t be persuaded to change their banking habits unless it’s simpler and suits their lifestyle.”
Mr Rolland said the availability of multi-channels for banking, especially around 24 hour access to services and emerging mobile technologies was a key point of favourability for banks.
“Australians are generally adopters of technologies which they see as making life easier, more convenient, saving time and money and giving back control.
“For branches, this means that frontline staff need to be better armed than their customers on product knowledge, including new, emerging trends and competitor information,” Mr Rolland added.
“Banks need to think differently about how they can improve digital channels for sales as well as everyday transactions to help improve customer experience as well as sales productivity.” Mr Rolland said Australian financial institutions were generally in a solid position compared to some of their global peers, however they were not immune to the challenges presented in the current environment.
The Customer Experience Series was created to look more closely at consumer decision-making with a particular focus on the pain-points as well as the opportunities to improve customers’ experiences and will take turns turning the spotlight on key sectors.
The mortgages survey findings are based on both quantitative and qualitative data collected from a nationally representative sample of 635 respondents across the ‘Big Four’ banks as well as regional banks.
1AustraliaSCAN conducted by Quantum Market Research has been measuring social values and cultural change by interviewing a representative sample of 2000 Australians each year.
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Ranked in order, the least wasteful industries based on how much time their workers say is wasted on a typical day were:
- Professional, scientific and technical services (17%) and health care and social assistance (17%)
- Financial and insurance services (19%)
- Trade- retail and wholesale (19%), public sector (19%), manufacturing (19%), and
- Construction and mining (20%).
Based on workers rating their organisation’s efficiency, the ranking changes to:
- Financial and insurance services (68%)
- Professional, scientific and technical services (66%)
- Health care and social assistance (64%)
- Construction and mining (63%)
- Trade (retail & wholesale) (60%)
- Public sector (56%), and
- Manufacturing (55%).
Ranked in order, the most productive states based on the least amount of time wasted on an average day were:
- Western Australia (16% of day wasted)
- South Australia (17%), ACT (17%) and Tasmania (17%)
- New South Wales (18%)
- Victoria (19%) and Queensland (19%), and
- NT (29%).
Based on workers’ views about the efficiency of their organisation, the order changes to:
- Western Australia (66%) and South Australia (66%)
- Queensland (62%)
- New South Wales (61%), and Victoria (61%)
- NT (59%) and ACT (59%)
- Tasmania (47%).
- 68% of respondents are proud to work for their employer
- 69% believe their work is valued
- 78% have a clear vision of what is expected of them in their role.
- 36% do not agree that their organisation’s processes and systems support role execution
- 41% do not agree that their organisation has the right level of focus and attention on effectiveness and efficiency
- 38% do not agree that their organisation operates effectively.
- 32% say they are planning to leave their organisation in the next 12 months
- Only 62% believe their skills are being strongly utilised by their employer
- 35% are already pursuing external opportunities. Approximately half of all respondents do not agree that there is a clear direction for their career at their current organisation.
- 51% say further innovation would increase productivity
- 44% do not agree their organisation gives innovation the right focus and attention
- 41% agree that innovation is not adequately recognised and rewarded
- 48% of people agree that there is a culture of continuous improvement in their organisation, 33% were neutral and 19% disagreed.
- 62% of respondents agree technology is important to their role
- 40% say technology has increased productivity levels
- The professional, scientific and technical sectors fare best on the technology front, with 55% of employees acknowledging technology has increased productivity levels over the past 12 months.
- 65% say additional, new or improved technology would make their organisation more productive over the longer term
- 39% don’t have access to the right technology and 42% don’t have the right training to apply technology effectively
- The construction and resources; and retail and wholesale trade sectors rank the highest in terms of technology wastage with at least 10% per week.