big four
Almost half of all Australian home loans are with one of the big four banks. Image – Wikimedia Commons and Canva
  • 73% of loyal customer felt the big banks were "more secure"
  • $335B was refinanced in the last 12 months, according to the ABS
  • Tic:Toc Home Loans current variable rate is 1.64% below the big four average

Borrowers who remain loyal to the big four banks could be losing up to $4,156 a year by failing to move to a more competitive lender, Mozo’s latest home loan analysis has revealed.

The research found that close to half (45%) of borrowers choose to stay loyal to the big four – Commonwealth, Westpac, NAB and ANZ – although on average for a $400,000 loan, they could be paying up to $124,672 more during a 30-year term compared to switching to a cheaper option.

Of the loyal customers, almost three quarters (73%) felt the big banks were “more secure” while 27% simply said they “just preferred bigger banks”.

“Blind loyalty to the big banks could be costing Australians a small fortune at a time they can least afford it,” said Tom Godfrey, Mozo spokesperson.

“Unfortunately many borrowers are needlessly opting to pay a significant premium on their mortgage because they believe bigger lenders are a more secure option.”

Tom Godfrey, Mozo

Online lenders are secure, too

While it is generally well-known the Federal Government has a Deposit Guarantee – which guarantees up to $250,000 per account holder per authorised deposit-taking institution – not as well-known is that online lenders are regulated by the Australian Prudential Regulation Authority (APRA) and their backers are authorised deposit-taking institutions.

Additionally, any money held in an offset account is covered by the Financial Claims Scheme – which likewise protects deposits of up to $250,000 if a lender goes under.

86 400, ING, UBank, Tic:Toc Home Loans and Well Home Loans (both of whom are funded by Bendigo and Adelaide Bank) are examples of online lenders protected by this legislation. The latter two are the latest online lenders who have significantly dropped their variable loan rates.

Tic:Toc has reduced its variable home loan rate from 2.04% down to 1.89% – making it the leading rate on Mozo’s database at 80% loan-to-value ratio (LVR). This rate is 1.64% lower than the big four average of 3.53%. Well Home Loans dropped its rate to 1.99% for an owner-occupier paying principal and interest at 80% LVR.

The low rates come as Australian Bureau of Statistics (ABS) data reveals that $335 billion has been refinanced in the last 12 months – the highest level in years.

“There’s never been a better time to compare interest rates, switch and save on your home loan, and while many people are refinancing, failing to do a little research and look behind the top end of town might mean you’re missing out on savings.”

Despite the Reserve Bank Governor (RBA), Philip Lowe, remaining adamant that the cash rate won’t rise above 0.1% until 2024, an earlier increase is possible if inflation and employment benchmarks are achieved.

“With many of us still struggling financially as a result of the economic downturn, spending a little time now to find the best rate you possibly can is a good way to reduce the strain on your household budget ahead of future interest rates increases.”

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