the mozo blog

Across the market rates are heading south as anticipation increases that the RBA will move to cut the official cash rate when it meets on the first Tuesday in November, exactly one year since it last felt the need to adjust rates. During September the Mozo rate chasing data team started seeing the first real indications of this change in mood.

In home loans, fixed rates led the way down. At the end of September, the average 1 year rate was 6.62%, 28 basis points below where it was in August, and the average 3 year fixed rate 43 basis points lower to 6.59% over the same period. All of the major banks reduced their fixed rates in September – the biggest 1 year fixed movement was Westpac slashing its rate by half a percent to 6.69%, and NAB cut its three year rate by 45 basis points to 6.64%.

The best 1 year fixed rate for home loans of $300,000 is Greater Building Society’s 5.89%, 40 basis points lower than a month ago (which was then the lowest 1 year fixed). loans.com.au took the title of cheapest variable rate loan in the market with its dream catcher home loan, dropping from 6.69% to 6.58%.

Term Deposit rates are also on their way down, with both the market average and the best 1 year rate down by about 15 basis points. At the end of September the average 1 year rate was 5.54% and the best in the market was Beirut Hellenic Bank at 6.10%. The major banks are pulling their rates back too.  ANZ had the biggest drop in any of the big four 1 year rates over the month, a 42 basis point reduction to 5.18% .

Competition in the online savings account area has been running hot for the last year, and over the 12 months to the end of September the average Savings Account rate increased by 35 basis points, 10 basis points more than last November’s RBA cash rate increase. Going against the trend, and perhaps a sign of things to come, Westpac cut the rate on its eSaver by 50 basis points to 4.80%.

The only positive online savings rate movement Mozo saw in September was RaboDirect increasing its bonus rate offer on its High Interest Savings Account by 0.01% so it could claim equal best rate in the market (with UBank and Virgin Money) at 6.51%.

When you’re setting up a small business or looking to switch banks, you’ll want two things from your financial institution: convenience and affordability. So you might think banks everywhere would be offering up competitive package deals on a suite of business products to service the time poor, cash-flow-starved start-up market. Not to mention the time-poor, expense-averse small business market looking for a better deal.

You’d be wrong.

This week we launched a business banking section on Mozo – detailing all the business loans, business credit cards and business bank accounts on offer. And we’ve been surprised to discover that of the Big Four banks only ANZ offers an online business package that rolls various products into one deal – and one monthly fee of $32 + GST. This gets you a transaction account and a range of extras such as a savings account, payment account, credit card and merchant services.

The catch is that other fees and charges may apply – for example, on terminal rental, which still attracts half the usual monthly rental fee. So by paying “one simple monthly package fee” you don’t necessarily avoid a slew of complicated monthly fees.

Westpac is happy enough to bundle services under its “Business Foundations” package, which marries a transaction account with two additional products and saves you “up to $1,100”. But again, you’re looking at a variety of different fees and charges – and you’ll have to choose between credit cards, a savings account and a business loan.

The catch this time round is that your potential discount of $1,100 is made up of savings such as “a 25% discount off Financial Management Workshop 101” – worth $225. Another way of looking at this is an additional cost of $665 for said workshop.

Commonwealth Bank and NAB offer all the same individual products, and a similarly complicated set of calculations to figure out which bank has the most competitive package overall. And challenger brands – such as Bankwest business accounts or the St George BizPack – make it equally difficult to estimate the total cost of running a few perfectly standard accounts.

It’s the same old bank game of burying fees in incomprehensibility. But stay tuned: Mozo is set to unpick the fine print to find out which banks have the best business deals.

Do you have a business banking question? Ask the gurus on Mozo Answers, our super new Q&A forum.

It’s the third week since we launched Mozo Answers and the questions just haven’t stopped coming! A big topic of conversation this week has been about debt consolidation, mainly squared around the best way to consolidate and pay off numerous debts as one.

There are a fews to do this, namely: using a credit card balance transfer, debt consolidation personal loan or through borrowing on your home’s equity. Each have different benefits and drawbacks depending on your circumstances, so I’ve run the rule over them to help give you a clearer picture.

Option 1: Credit Card Balance Transfers

In my opinion the best option is to take advantage of one of the balance transfer credit cards. Simply pay off all your debts with an existing card, then transfer the balance onto a new card with a balance transfer offer. Some cards are currently offering extremely low rates for long periods of time. For example, ANZ has 2.9% for 18 months, NAB has 0% till the end of the year and Westpac has 0.99% for 9 months on particular cards. Using a standard credit card* and an average credit card balance of $3,000, I used Mozo’s nifty Credit Card Health Check tool to run a few scenarios to illustrate the potential savings to be had.

As you can see, there’s a whole lot of interest to be saved. This is particularly evident in the first scenario, where making slow but steady payments of $100 a month on an ANZ First card could save you $1267 and a whole lot of time to boot. Conversely, if you’re paying it of in big chunks you’ll pay barely any interest at all with the Westpac 55 day Mastercard or Visa!

Option 2 – Debt Consolidation Personal Loans

Another option is to take out a debt consolidation personal loan. In short, you roll all your various outstanding debts into one loan which you then pay off at the rate set by the lender. They’re a decent option, but these loans tend to feature much higher rates than balance transfers. That being said, with some rates below 10% they are still potentially a lot cheaper than a credit card’s purchase rate (which can go as high as 23.5%) and are well worth looking into if you want to avoid the temptation of having another credit card in your possession.

Option 3 – Home Equity Loans

Finally, for those who have the option, a third avenue would be to look at borrowing from your home’s equity (for example line of credit home loans). This would allow you to consolidate your loans at a home loan rate much lower than what you would see in most personal loans. They won’t be as low as balance transfers, but if you’re looking for long-term solution it’s a very viable fix as the ongoing rate is far lower than that of a credit card – the flip side is that as the payment term is much longer you may end up paying more interest.

If you’ve got more questions or you’re a finance expert ready to do some answering yourself, head on down to the Mozo Answers forum.

If you haven’t heard, apparently banking’s ‘Big 4’ is now the ‘Big 3’. Through a carefully planned and executed integrated campaign rooted in social media, NAB have decided to ‘break-up’ with ‘former’ cohorts Commonwealth, Westpac and ANZ.

On face value, it seems like a smart decision from NAB. Attempting to shed the image shared by the ‘Big Four’ could only help it’s stuttering financial performance and doing so by shedding fees and lowering rates is also a great step. However, could this move backfire in the long term?

By breaking up with their illustrious rivals, NAB’s losing its one key positive attributes – being better than the rest of the Big Four. Amongst their former brethren, over the past 18 months NAB had managed to position itself as the cheaper alternative with lower rates and less fees. Now having ‘broken up’, it opens them up to greater comparison with challenger brands, the likes of ING Direct, Aussie and RaboDirect, who have been doing this for a long time anyway. And this comparison isn’t pretty reading, particularly when looking along at the home loan battleground where the bulk of this banking war is being fought.

For example, NAB may have the lowest rate standard variable home loan out of the Big Four, but compare it to the rest of the market and they rank a lowly 36th out of the 58 different providers’ standard variable loans we have on our site. If you go on to take upfront and ongoing fees into account by sorting by comparison rate, they sink even further, plunging to 43rd on our list – though still above Commonwealth, Westpac and ANZ I might add.

Which leads to the wider problem with NAB’s strategy. I applaud its moves to cut fees and interest costs and I enjoy the fact that it’s trying to reignite competition in the consumer banking marketplace. The problem is, if everyone starts surveying their options and voting with their feet, will NAB be the winner? Who says an irate Commonwealth Bank customer is going to land up on NAB’s door when they can go a bit further down the road and get an even cheaper home loan? Moreover, what’s to stop NAB’s customers doing the same? Mutuals and Non-bank lenders on average still have far lower rates and fees.

If everyone starts looking for the best deal, NAB’s got a battle it can’t win. Not yet anyway. Breaking up may be hard to do, but only time will tell if it was the right thing to do.

Compare home loans at Mozo.

Welcome to week 2 of the ‘Mozo Answers Question of the Week’. Our Answers forum has been bombarded by questions about deposits this week, mainly centering on what the best rates are for both savings and term deposit accounts as well as the respective benefits of choosing a term deposit over a savings account and vice versa.

Lets start with savings accounts, where there are a couple of standouts well worth looking at. First off, BankWest’s “Regular Saver” has no monthly fee and a market leading rate of 7.0%. It’s an amazing rate, however you can’t make any withdrawals and you can only deposit up to $500 a month. If you can’t stick to those parameters, UBank’s USaver is a great option. It’s got a fantastic interest rate of 6.51% as long as you set up an automatic savings plan of at least $200 a month, 6.01% if you don’t. There’s no monthly fee, you can withdraw and deposit as much as you like and there are no balance conditions either.

Turning our focus towards term deposits, as a result of some pretty fierce competition there are a lot of attractive rates out there at the moment. To get the best out of a term deposit you’re better off giving it some time – for example, to get a rate of 6.0% or over you’ll have to invest your money for a minimum of 6 months. Take a look at the table below to see some of the best rates out there on various terms:

As you may remember, a media firestorm erupted last week when Westpac announced it would charge interest on fees and interest on all Westpac Credit Cards. Westpac defended itself by saying this is standard practice among banks — but just how standard is it?

Well, it seems Westpac was right. Across the ‘Big 4′, interest is charged on interest and fees. And they’re not the only ones either, with the likes of American Express, Citibank and St George all guilty of the same tactics.

But this isn’t all — while digging into the fine print about interest and fees, I discovered a myriad of sneaky tricks banks use in charging customers. Forget the trivial feats of magicians and illusionists like Blaine, Copperfield or Criss Angel; for real trickery you need look no further than your monthly credit card statement.

For example, a widespread ace you’ll find up providers’ sleeves involves the specific debts your repayments actually pay off. Most cards’ conditions require your repayments to go towards those purchases that attract the lowest rate. This makes any purchases made at a higher rate more likely to attract interest charges, as they are the last to be paid off.

Another little rabbit in the hat is the date from which interest is charged. Instead of charging interest from the date a transaction is posted to your statement, some providers charge from the date of transaction. While there’s only a few days’ difference, it can add up, especially for larger purchases.

And then there’s the cleverest banking sleight of hand — the ‘prestige’ in magician’s parlance. The typical 44-55 days interest-free period on purchases is often viewed by customers as a breather between spending and interest charges. But quite often this buffer pulls a disappearing act. If your balance is not paid in full by the due date, you’ll lose your interest free days with Commonwealth, ANZ and Westpac. NAB is more lenient, but you still have to maintain your monthly minimum repayment.

So what does this mean for your bottom line? If you lose your interest free days, your bank will levy interest comprising a total of daily interest charges on your purchases going all the way back to the date of purchase. While NAB and ANZ only charge this interest on the overdue amount, Westpac and Commonwealth Bank will charge the 55 days of interest retrospectively on the entire balance, even if minimum repayments are met. What’s more, you won’t get those interest-free days back until those old balances are paid in full. In some cases, such as BankWest, you’re required to pay two consecutive statements in full before they give you this ‘luxury’ back.

In The Prestige, the magician Robert Angier (Hugh Jackman) warns us: “If anybody really believed the things I did on stage, they wouldn’t clap, they’d scream.” I’d be surprised if your next credit card statement was greeted with applause…

Compare credit cards at mozo.com.au

Headlines were made yesterday when Westpac announced it will charge interest on interest charges and fees on all its credit card accounts, starting in June. While media commentators and consumer groups savaged the bank, and the Treasurer labelled it a “serial offender”, the new charges are more or less standard practice — at least among the big banks. So why all the fuss?

On the one hand, as Westpac itself points out, the changes will have a “tiny effect on balances”, apparently 67 cents a month for those affected. Moreover, Westpac is simply coming into line with the other Big 4s – so why single it out for being a late adopter of minimal charges?

The problem is that, at the end of the day, it is another tricksy initiative: fiddling with the fine print to raise revenue without altering the headline rate. And if the net result is in fact tiny, is it really worth the media storm that’s now engulfed the bank?

You have to think Westpac’s PR department has either had a really big St Patrick’s Day or been taken hostage by the bean counters. Consumer sentiment towards Australia’s largest home loan lender is at an all-time low, following its 45 basis point rate rise in December and the subsequent smoothie-fueled furore. Gail Kelly’s leaked comments about rising funding costs – and possible interest rate hikes of a further 30 to 40 basis points – have hardly helped. And profits are already up a third on the previous year, while Westpac was awarded the double-edged title of “World’s most profitable bank” by the famed Boston Consulting Group.

Justifying new charges in a general banking climate of fee cuts is a difficult proposition. At the same time, slamming a bank for catching up to its peers on a minor new charge is more media stunt than serious consumer advocacy.

Stay tuned for our wrap up of sneaky credit card fees — who’s leading the charge, and who simply has bad PR.

Compare credit cards at mozo.com.au

I warned you.  Westpac were off the mark early on Tuesday morning with an aggressive term deposit rate, and I blogged that it would put pressure on home loan rates to increase beyond the RBA.  Bingo!  Westpac was first out with that announcement as well, so clearly they’d planned the whole thing: put out the term deposit good news first to take the sting off the home loan bad news.

St George are matching the Westpac term deposit offer, so no prizes for guessing what their home loan rates will do.

Now watch the other sheep follow the leader.

Compare home loans at mozo.com.au

Compare term deposits at mozo.com.au

The new Westpac Ignite Credit Card launches today, replacing the much loved Virgin Credit Card held by over 750,000 Australians.

Westpac is promoting the Ignite Credit Card as everything the Virgin card is, and more. But will the new Westpac card really ‘ignite’ the imaginations of all those ex-Virginites?

And if you’re an ex-Virgin customer, should you stick with the Ignite Credit Card or look around for a better deal?

You can see how Ignite stacks up against the rest of the market with our quick Compare Credit Cards tool. Just select Westpac as your lender and Ignite as your card.

Or read on for the Mozo low down on whether Ignite is a dud or a deal.

Westpac Ignite Credit Card Pros:

• Still promises no annual fee… ever (great to see they’ve kept this promise)
• Still has a low interest rate of 12.99% (but beware the cash advance rate is 17.74%)
• Still up to 55 interest free days on purchases
• Added chip security to protect your card against fraud
• No changes to your credit card number or payment method

Westpac Ignite Credit Card Cons:

• No more funky card colours: just one boring red card design. We can’t help thinking they’ve missed a trick here – how many cardholders would have stayed with Westpac just to keep their purple, pink or black plastic?
• No more funky Virgin brand: the cheeky cut off corner is gone and the Ignite Credit Card looks pretty much the same as any other card. Solid. Respectable. Not exactly the sort of brand that will appeal to many Virgin customers.
• No more Mates Rates rewards: Westpac has promised it’s own ‘Instant Offers’ program but details are sketchy.

The good news is that if you’re after a combo of low rate, no annual fee and interest free days, the Westpac Ignite Credit Card is definitely one of the best deals around. But you can do better with the mecu Visa credit card which offers a purchase rate of 11.99%, no annual fee and 55 interest free days.

If you’re paying interest on your credit card balance, then you’re likely better off switching to a card with a lower interest rate and a low annual fee. The BankWest Lite card offers 0% on balance transfers for 8 months and a low ongoing rate of 10.99%, with a $59 annual fee. This card also has an ‘Instant Discounts’ rewards scheme.

Alternatively the Aussie MasterCard offers a 12 month introductory rate of 9.99% on purchases and 5.99% on balance transfers. The ongoing interest rate is 11.74% and the annual fee is a respectable $49.

And finally, if you’re all about great looks over cost, then check out the NAB Low Rate Visa in silver or pink and the cute little NAB Visa Mini in a choice of 5 colours.

Compare credit cards now with Mozo.