Graeme Elvin Mackenzie Elvin

It feels like it is a real war out there. Everywhere you look the banks are fighting for business, offering competitive interest rates; contributions to legal fees, to valuation fees, and to bank fees.

After all, when there isn't much new business around, the only way for a bank to grow is to entice another bank's customer to jump ship.

While one bank is rebranding, the others are gleefully targeting its customers.

But think carefully before you take the plunge. Nobody minds people changing banks, because everybody involved ends up making a dollar.

The mortgage broker, the banker, the lawyer, they all collect a fee on the way through, but who pays in the end?

Remember, there is no such thing as a free lunch.

Why not ask your existing bank what they will do to keep you as a customer.

For each new customer the bank attracts the bank will incur the administration costs of setting up a new customer and all the associated fees.

It is far cheaper for banks to keep existing customers, so why wouldn't they pay you some of that money to stay instead, or at least offer you a more attractive package. Now is definitely the time to ask.

Whether you stay or whether you go, having made your decision about which bank you are going to go with, you still need to think about interest rates.

What is the interest rate going to do? Do I fix or do I float? The short answer is - who knows?

There are plenty of experts out there, but the rule of thumb is that you fix to limit your exposure and to control your outgoings.

The banks like you to fix because it locks you in as a customer, it may be difficult or expensive to get out of your loan for the fixed term period; so from the bank's perspective, the longer the better.

By encouraging people to fix their interest rates the banks pick up bank fees, insurance commissions, credit card fees and interest, and this is where the profit is made in banking.

If you are going to fix, you don't need to fix it all. You can fix part of your loan and float part of it, spreading the risk of sky rocketing interest rates while managing the cost of high break costs.

Ask the questions.

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