- Long-term mortgage holders are possibly missing out on lower interest rates
- Borrowers could save an average of $404 a month by switching to a lower rate
- Big four banks offer cashback deals to new customers, but not to existing borrowers
Current mortgage holders who have been with their lender for many years are likely missing out on lower interest rates according to new data.
According to Compare Club, borrowers on a 6.45% variable rate with one of the big four banks could be saving an average of $404 a month in mortgage repayments if the lender offered them their best rate.
Talk to your lender
Compare Club CEO Lance Goodman said, “Our first piece of advice to homeowners is always to speak to your lenders and see if they can lower your interest rate, but this data really shows the cost to Australian households who don’t shop around.”
“Our brokers are also finding that, for existing mortgage holders, lenders will rarely match the best rate that they’re advertising to new customers unless the homeowner says they’re switching banks. It means that mortgage holders have to often go through long negotiations just to be treated the same as a new customer.”
Mr Goodman said if a customer managed to secure a loan with the best possible variable rate with any of the big four banks in May 2022, when the RBA first started rising interest rates, they would still be out of pocket by an average of $168 per month less than a year later.
“Sadly, lenders’ loyalty tax starts almost from day one. On average, the best rates of the Big Four should be 0.47% lower than they currently are, if Westpac, ANZ, CBA, and NAB applied the same cash rate to loans for new customers as they did to their existing ones,” he said.
“Existing customers who prudently refinanced their loans before the cash rate got too high can feel particularly hard done by. They may still be able to negotiate down to their lender’s lowest rate, but they’re not eligible for cashback offers, even though they’ve been responsible with their finances.
“At a time when Australians are feeling the pain of ten consecutive interest rate rises, there really is little incentive for mortgage owners to stay with their current lender. This is especially true for the 800,000 homeowners who are moving onto variable rates this year and are likely to get hit with a loyalty tax on top of a massive hike in monthly repayments.”
Better options
Mr Goodman said lenders are trying their best to bring in new customers.
“An extra few thousand dollars in the pocket would be a huge help to most households right now and refinancing is one of the best ways to help make your bank balance look a little healthier,” he said.
“Lenders are falling over themselves to entice new customers and some of the offers in the market are really attractive… By exploring your options and comparing deals, you may be able to find a home loan that not only offers a better interest rate but also comes with added benefits like cashback.”
