Banks face angry exodus

Big Bank profiteering is leaving many home loan customers considering a switch to credit unions. Source: AdelaideNow

A study of more than 15,000 people with a mortgage shows a widespread belief the big banks profited unreasonably from last month's Reserve Bank 0.25 per cent interest rate rise by raising rates even higher.

And they are increasingly considering credit unions as an alternative to the big four banks - which dominate the mortgage market - to provide their home loans.

The research shows 23 per cent of mortgage-holders, or more than one-in-five, have already started looking around for a new financial institution. If the statistics hold true for the 4.4 million Australians with a home loan, that means at least a million mortgage-holders are already shopping around, according to the research by financial services research firm CoreData.

A year ago, the same CoreData research showed that just four per cent of mortgage-holders - or one-in-25 - were shopping around.

CoreData principal Andrew Inwood said the research showed anger with banks had reached a peak. "Normally when we run this sort of data, large numbers of people express the desire to change provider, but much smaller numbers actually begin this process," he said. "But this time, with one-in-five people now having started to look for a new mortgage provider, we seem to have reached a tipping point."

In total, more than 43 per cent of mortgage-holders say moves to raise interest rates above the official RBA lift prompted them to actively consider changing financial institutions.

A popular option for those looking to switch was the credit union sector. More than 16 per cent of disaffected mortgage customers are considering the non-profit institutions following the November rate rise.

The research has found the biggest handbrake on changing mortgages is exit fees. Four in 10 of those surveyed said they were likely or very likely to change providers if exit fees were abolished. Banking reforms proposed this week by Treasurer Wayne Swan would eliminate exit fees on new loans from next year.