Is this the best interest rate in Australia for sea and tree changers?

by Mike Wood03 Sep 2021

One of the biggest names in customer-owned banking, BCU, has launched a new rate that seems perfectly designed for the growing tree changer demographic.

Tree changers are one of the biggest drivers in the Australian property market, representing a demographic shift that has seen professionals depart the cities for the country as the pandemic has made work from home part of the new normal.

BCU’s new rate rewards those with less than 60% loan to value ratio (LVR), which includes a large portion of those selling high price Sydney properties and buying up more reasonably priced homes in Regional Australia.

Those with 60% or less LVR can access a 2.29% variable rate, while the next tier, 60-80%, will get 2.39% from BCU.

Speaking to Australian Broker, BCU general manager Michael Ribbens said that tree changers were a key demographic in Coffs Harbour, where the bank is based.

“We’re seeing a lot of that,” he said. “There’s a lot of people in Sydney and Melbourne who can work from home who are asking themselves why they need to pay a massive mortgage in the city when they can live in Coffs Harbour, Port Macquarie or any of these areas and probably sell their house and have a smaller mortgage obligation.:

“The challenge for brands like ours is that the average Sydney person might not know who BCU. By the time they get into the town,  they’ll certainly find out about us. But they might come with their own home banker, who will no doubt try to help them into their next house in this area.”

“I think, over time, as they hear our advertising and see what our proposition is for members, they will give us serious consideration. We’re seeing a lot of refinance opportunities that we’re getting from people from Sydney, and with our latest $5,000 cashback offer, it’s a compelling proposition.”

The rate itself is one that is rarely seen in the marketplace.

“We’ve always had a popular OMG product, and while the headline is a competitive 2.44%, we decided that we wanted to reward our members who have a lower LVR,” said Ribbens.

“We created these two lower tiers, 60-80% and lower than 60%, and then because the risk profile on these is different, therefore we thought the cost should be too.”

“We thought we’d be proactive and really help out members who, particularly in Covid times, are doing it hard. It’s a great way for us to demonstrate that being with a mutual is a great way to save money, and that our only purpose is to make members’ financial dreams come true.”

“There are a few players that offer this, but not many. You won’t see it being advertised very strongly in the marketplace though I do know a few other players do offer it.”

Brokers are often quick to jump at offers that can see simple loans approved quickly, and with a good rate for their customer.

“Brokers have a duty to give their clients the best deal that they can find, and we can make it easy for them as well,” said Ribbens. “Price is one part, but getting the transaction through the organisation is just as important to the broker and their client.”

“This is where we’re working really hard to make sure that we have slick processes, and with competitive rates, it should be a winner for all parties.”

Customer-owned banks are perhaps uniquely positioned to offer these rates and offers.

“Each of the brands that exist in Australia have their unique positioning,” explained Ribben. “Whether it be their heritage or their presence in a local marketplace, and one of the things that I’ve learned through regional New South Wales and southern Queensland is that every town is different.”

“Some brands are powerful in certain towns and at BCU, we’ve got our certain heartland areas where we’re a household name and most people in the town would know about us and probably have had an account with us.”

“We love the idea that the BCU brand can be embraced by the local community and we try to advertise in a cost-effective way so that we don’t spend too much on marketing, but we get enough of a profile that the member can experience what we think is a unique service.”

Read more: How one customer-owned bank sets the lowest interest rate in Australia