David Cunningham: Squirrel Mortgages CEO on the record high number of mortgage holders changing banks

Short term loans, minimal or no break fees, and cash-back incentives are driving a record number of mortgage holders changing lenders in June. 

More than 3,500 holders switched nearly two and a half billion dollars of debt between loan providers last month. 

It's the highest since records began in 2017. 

Squirrel Mortgages CEO David Cunningham told Mike Hosking it’s a bit of a pass the parcel exercise for banks. 

He says that rather than pass on a lower interest rate to everyone, they just give them to those who go searching. 

Cunningham told Hosking it’s a good way to seemingly compete with each other without really impacting their profits. 

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Episode Transcript

Speaker 1 (00:00):
Interesting insight into how we're handling our money. So we've
got a record number of US switching mortgage lenders, two
and a half billion dollars worth transacting in June alone.
David Cunningham's CEO scorel Mortgages.

Speaker 2 (00:10):
Back with us morning, Good morning, Mike.

Speaker 1 (00:12):
All the switching that's going on, is that a direct
result of competition. Banks are wanting to do deals and
get your money, if only sort of.

Speaker 2 (00:22):
You know, banks use different tools like interest rates and
cash backs and things like that. Show and when your business,
it is a bit of a pass to pass of exercise.
You know, you move from one bank to the next,
and different customer moves from that bank to the other
one and sign So it's a bit of a pass
to parcel. It's sort of a way for It's a
more sort of a way Oligopoli's work. Actually, you know,

(00:44):
rather than pass on a lower interest rate to everyone,
they just for those that go searching for a cast
back by changing banks get good deals. So you know,
interest rates would be lower if we didn't have cast backs.
But it's a good way for banks to compete with
each other, seeming to compete with it really impacting their profits.
To be honest, all good for the customer. Sure takes

(01:05):
advantage of.

Speaker 1 (01:06):
It if you're prepared to do it. So what are
we seeing in these numbers? So you've got zero point
three billion in new lending, which is up two billion
on last year, and I know this time last year
was soft. So you've got some new lending. There. Is
that good? Or are we just shuffling money round and
round in circles? No one's actually doing anything.

Speaker 2 (01:20):
Well, no, I'm in the underlying profit property market back
to historical sort of trends. So you know, the underlying
turnover in the housing market is back to normal. You know,
we had that big boost post COVID and it's sort
of dropped massively and then it's sort of back to
normal trends. So what we're sort of seeing is a
somewhat elevated level of refinancing. I mean, and looking back
at Squirrels numbers, you know two years ago it was

(01:43):
thirty cent of their business was refinancing. It's thirty five
percent in the last six months. Well it's nothing extraordinary,
but it's one of those things. If you're not on
the boat, you're missing out.

Speaker 1 (01:54):
Fair enough, and our investors in well, any Look, anyone.

Speaker 2 (01:57):
With a mortgage that had a has a you know,
most people are new Zonder fixed rates. Anyone in the
mortgage that's that's got a fixed rate maturing, and there's
about forty percent of the market is on a fixed
or floating rate that's going to mature in the next
six months. So the first things talked to your bank,
talk to your broker, and you know, it's generally weird

(02:19):
estimate about a five hour process. And look, you can
typically get point eight to one percent cash back from
your bank if you switch banks. And that's really one
of the drivers here. So let's say you've got a
half million dollar mortgage percent four thousand, it's going to
cost you fifteen hundred dollars in legal fees and things
like that. So to enough thousand, five hours and the

(02:40):
brokers off, it's doing a lot of the work for you.
So five hundred bucks an hour, it's not a bad
return on investment day.

Speaker 1 (02:45):
They're they're good numbers, though I not. Also there some
activity in the high debt to income people. Is that
is that a confidence thing or have they just been
waiting desperately for interest rates to come down? They can
lend a bit more, borrow a bit more rather and
then they're in.

Speaker 2 (02:58):
Well that's pretty many first home buyers, a bit in
the investors space, but that's a pretty quiet part of
the market at the moment. So first home buyers typically
you know, high loan to value ratios to are borrowing
a lot with a smaller deposit and more of their
income is going to it. So it's picking up a
little bit. It's nothing like it was three or four
years ago during the boom of COVID, but you know,

(03:20):
first time buyers are always active in the market. It's
sort of a bit of a goldilocks time for first
home buyers. And interest rates have come down, banks are
willing to lend. Property prices are stable, if not sort
of falling. You know, you can pick and choose the
right property. You don't have to sort of make an
offer on the first place to see. So I've sort
of called it a bit of a goldilocks time for
first time buyers.

Speaker 1 (03:38):
Good stuff, David appreciated David Cunningham out of Squirrel Mortgages.

Speaker 2 (03:42):
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