Loyalty – or is it laziness – is costing some Australians an extra 0.86 per cent on their borrowings.
That’s what mortgage brokerage Lendi estimates lenders are, on average, charging their existing compared with new customers
With interest rates continuing to rise, mortgage holders are being advised to shop around for a better home loan rate if they want to avoid paying the ‘loyalty tax’.
Continuing its recent trend, the Reserve Bank of Australia (RBA) yesterday lifted official interest rates by 0.25 per cent to 2.85 per cent. At least one bank wasted no time passing on the increase to customers.
Aimed at curbing consumer spending during a time of low unemployment, the latest rise will add around $88 to monthly mortgage payments on the average home loan amount of $589,141.
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Although the move was expected, it’s still piling on the pain for homeowners already struggling with the cost of living.
The banks are the big winners, especially if you’ve held your mortgage with them for a long time and haven’t looked around for a better deal.
You may have noticed the rate you’re paying is higher than the rate being offered by your bank to new customers. This is an example of the ‘loyalty tax’, or your lender seeking to attract new business, but doing nothing to retain existing customers.
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When looking for a new home loan rate, a good first step is to contact your lender to see if they can improve your offer. If they can’t (or won’t), it may be time to look elsewhere for a better deal.
Davide Hyman, chief executive of mortgage brokerage Lendi, told The Australian that shopping around for a better home loan rate can potentially save you hundreds each month – and thousands over the life of the loan.
“We know the majority of Australian mortgage holders remain either loyal to their current lender or passive about the interest rate increases,” he said.
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“More and more we are seeing how lenders aren’t providing value to their existing customers – and it’s costing them in the long run. We’re seeing numbers from $60,000 to $150,000 over the life of a loan, depending on your loan size.
“That’s around $250 to $500 every month this is costing mortgage holders – figures that can instead assist with the increasing cost-of-living pressures that are only expected to rise further over the next six months.”
So, what might seem like a small change each month can total an astonishing amount in extra interest by the end of the loan term.
Has your monthly mortgage payment gone up? When was the last time you compared rates with other lenders? Let us know in the comments section below.
