Our Case against the National Australia Bank Limited

This fixed interest rate lasted a year. In an attempt to keep our business at time of renewal the manager offered us a National Tailored Home Loan Scheme in place of the variable interest rate loan which was then at 10.75%. In return my wife agreed to move her credit card business from ANZ Bank to National Australia Bank. There were no costs associated with moving our housing loan from one to another, unlike the situation being presented to us now.

We knew at the time that interest rates were on the decline so enquired about a 12 month fixed period.... an aspect of the contract which we failed to check on as we had always trusted the bank to do the "right thing".

But no more.

According to our records the loan comes up for renewal at the end of January 1997 - but the contract stipulates a two year period which is obviously not what we wanted.

What follows below is the sting and why the Australian banking system is seen by a large number of Australians, rightly or wrongly, as parasites .

But first, in the last financial year National Australia Bank Limited made over Au$2 billion profit (the largest in Australian corporate history) while proclaiming publicly that it had "shrinking profit margins".

Here are the financials related to my wife and my housing loan:

The interest rate on this current two year fixed rate housing loan is 8.75%.

At 8.75% we are paying Au$12,687.50 per annum on a loan of Au$145,000.

We could get a loan with a bank like the Commonwealth Bank (or even National Australia Bank) for 1 year at 6.99% or at a cost of Au$10,135.50

The extra interest that we are locked into (unless we pay penalties) for the next twelve months are: Au$2,552.00 or over Au$200 per month or about Au$7 per day.

So let us have a look at the penalties for transferring this loan to another (even from one to another with this bank):

In 1995 we were sucked into what is called "a 5 year loyalty agreement" a "scheme" which is, the National Australia Bank have informed us, now outlawed in Australian banking and a scheme who's implications we did not know or understand. Because of this "loyalty agreement" and because of the "breaking of our two year contract" we have a letter from our Ipswich Bank Manager dated 17th January 1997 which advises us that:

"The costs associated with refinance of your home loan is:

• Prepayment fee (isn't that a lovely money making word): Au$3,821.34
• Release fee: Au$80
• Settlement Fee: Au$110
• Title Office fees and other Financial Institution costs associated with refinance are not included.

The bottom line is that we did not want and did not ask for the scheme that "We are now locked into" and if we break it we will have to pay over Au$4,000 before we even pay the costs and charges related to taking out a new home loan.

Our "legal" options therefore, are to pay about Au$2,552 in extra interest over the next 12 months or pay about Au$4,000 in penalties.

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