A while back, we wrote about Lenny: the friendly lender who rings out of the blue to see how things are going.
Well, from all reports Lenny’s been especially busy lately! We’ve had lots of clients tell us about unsolicited calls from banks they hold an account with. And as rates have climbed, so has the number of “special offers” supposedly on the table.
First up, let it be clear: we’re not anti-Lenny
Your lender calling to check in is completely reasonable. You pay them interest every month, so of course they want to stay in touch, just like we do.
And if Lenny’s offering you a great deal? Brilliant!
What we have an issue with is Lenny suggesting something (and then harassing you to implement it immediately) that you haven’t had time to think through. Or, suggesting something that doesn’t even fit in with what you’re trying to achieve.
Stories we’ve heard from clients lately
The stories tend to follow a similar pattern:
- The rate changes. The rate offered on the phone isn’t the rate that shows up on the loan contracts once it’s time to sign on the dotted line.
- Nothing’s in writing. It’s all verbal, so there’s nothing to compare, check or hold anyone to.
- The package sounds great… A product gets bundled up to sound appealing today, but doesn’t suit your longer-term plans. (Also, some of the standard features that come with certain home loans are being sold as ‘special offers extended to you only’, which isn’t an accurate representation at all of the product.)
Why Lenny might not see the whole picture
Look, it’s not always Lenny’s fault.
Often Lenny doesn’t know what you’re trying to achieve because they haven’t spent the time to understand your full situation. They’re looking at things from the bank’s side of the desk, and they can only offer their own bank’s products.
There’s also a legal difference worth knowing about. Mortgage brokers are required by law to act in your best interests when recommending a loan product.
Lenders dealing with you directly don’t have to comply with best interests duty. Put another way, whilst they need to make sure a loan isn’t unsuitable, they’re under NO legal obligation to put your interests first and under no obligation to find you most suitable lending option.
When we set up your loan, we like to build it around where you’re heading, not just where you are today. If Lenny’s offer doesn’t take that into account, it deserves a second look.
Classic Lenny ‘offers’ or advice that might not suit you
- A fee-free savings account, when you already have an offset account linked to your home loan. Your savings are likely working harder in the offset. (We’ve seen this one more times than we can count.)
- A higher credit card limit, when you’re already juggling debt, or when a bigger limit could reduce your future borrowing capacity.
- Locking in a fixed rate, if you’re thinking of selling soon, exploring a refinance, or have a healthy balance sitting in your offset.
- Combining your loans “to keep things simple”, which can tie up more of your property as security than necessary. And mixing investment debt with your home loan makes things anything but simple. (Just ask your accountant!)
- Forfeiting access to an offset account in favour of redraw. Now, for some borrowers this can be a good strategy. But if there’s a chance your property might become rented one day, you need to be aware of the longer-term taxation implications of using a redraw facility instead of an offset account. (We’d take the bet that Lenny doesn’t know much about this.)
When Lenny gets it right
To be fair, sometimes Lenny does ring with a good offer, like a competitive variable rate when your fixed term is about to end.
And here’s our promise: if a lender offers you something better than what you’ve got, and it’s worth your while to move, we’ll absolutely tell you.
Your three-step plan for dealing with Lenny
- Take the call. Listen to what’s on offer. There’s no need to hang up.
- Get it in writing. Ask for the rate, fees and any conditions by email before you agree to anything.
- Check it with us. We’ll compare it with your current loan and your long-term goals, and tell you plainly whether it stacks up.
A quick check now could save you from a decision that’s hard to undo later.
So next time Lenny calls, have a listen, then reach out to us before you say yes to anything.
We’re here to help.
