It's labelled the 'lazy tax', and it means Australians are paying an estimated $11.6 billion each year that they could easily avoid with a bit of time and effort.
Sadly, many of you will read this article and not do anything about it.
It refers to staying with your existing providers of your home loan and banking, insurance, grocery and utility providers, mostly because we think the process of switching is too hard.
According to new research by the Queensland University of Technology (QUT) and commissioned by Heritage Bank, while half of us seriously consider switching essential service providers, less than a quarter actually act on those intentions.
The research looked at a variety of bank and service providers including home loans, credit cards, home and contents insurance, energy and grocery suppliers, and mobile phone and internet providers.
Nearly 83% of Australians said they would switch their home loan if they could save $3,000 per year. If that was the case, our big four banks Australia and New Zealand Banking Group (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC) would have virtually no customers.
Westpac announced today that it was raising its variable mortgage rate by 0.2%. Owner-occupiers on Westpac's standard mortgage will now be paying as much as 5.82%.
By comparison, there are 6 home loan products offering rates under 4%, including a 3.99% rate on offer from UBank – backed by National Australia Bank. The difference between those loans and Westpac's headline rate over the life of a loan is staggering as you can see below.
According to InfoChoice's mortgage calculator, the 4% loan would save borrowers more than $119,000 over the 30-year life of a $300,000 loan. On a $500,000 loan, borrowers would save close to $200,000 over the life of the loan, including more than $5,000 a year after 10 years.
Yet how many of Westpac's home loan customers will switch, despite the massive savings on offer?
The problem is that almost a third of Australians think switching is too much effort, and 1 in 6 don't switch because they think it will cost too much.
Dr Juliana Silva-Goncalves from QUT commenting on the report said, "It's interesting to see apathy as the key barrier to switching across such a wide range of industries. This belief it's too hard to switch and too costly, is stopping households from saving thousands of dollars."
Those who have shopped around to find better deals are now collectively $2.5 billion better off according to the research. A third of those switching home insurance providers saved more than $300 while switching grocery stores saved nearly 15% of people more than $1,000 per year.
Foolish takeaway
Clearly consumers could save thousands if they were willing to switch their home loans, personal loans, credit cards, mobile and internet service, utilities and insurance providers. We've highlighted this issue before too – back in February 2015.
Unfortunately, it seems many of us couldn't be bothered and many of the product and service providers know it, allowing them to continue charging much more than their competitors.
