Mortgage customers getting stung with rates around 6 per cent

Mortgage customers are getting stung with interest rates around the six per cent mark and are throwing money down the drain. Find out the best deals available.

Exclusive: It’s the great home loan gouge and it could be happening to you.

Mortgage customers are getting stuck on high interest rates as high as nearly six per cent, wasting tens of thousands of dollars in interest charges for failing to take action.

And new realestate.com.au research showed only one in two customers know the exact interest rate they are paying.

Exclusive customer data revealed by mortgage broking firm Home Loan Experts found the following owner occupier rate gouges:

• Borrower with a $280,000 loan paying principal and interest rate of 5.89 per cent, refinanced to 3.8 per cent.

• Borrower with a $220,000 loan paying 5.49 per cent fixed rate, refinanced after five-year fixed term to 3.95 per cent.

• Borrower with a $458,000 loan paying 5.19 per cent interest only, refinanced to principal and interest rate at 3.78 per cent.

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Customers need to check their mortgage interest rate to ensure they are not paying too much.

The firm’s managing director Otto Dargan warned that customers could be stuck on a lender’s standard variable rate — often around 5.3 per cent for owner occupiers and 5.9 per cent for investors.

“These rates are a complete rip off and are well above the interest rates that a new customer would pay,” he said.

He said banks use tricks to catch out unaware customers including pushing those who were on a fixed-rate loan that has ended onto a much higher rate when the term ends.

Mr Dargan said customers needed to check their interest rate regularly to ensure they don’t get fleeced.

Data from financial services firm Canstar found on a $300,000 owner occupier principal and interest loan if a customer paid the highest variable rate of 5.93 per cent and switched to the lowest rate of 3.44 per cent they would save $448 per month.

Mortgage customers are getting stuck on deals with ridiculously high interest rates around the six per cent mark.

The difference over the life of the loan would amount to $161,000 savings in interest charges.

Realestate.com.au’s general manager of financial experiences Eloise Wall said given the competitiveness of the mortgage market customers should be checking their rate deal.

“If your rate starts with a ‘4’ it’s quite likely you are going to be able to find a rate with a ‘3’ that could be saving you significant amounts of money,” she said.

“It’s about seizing opportunity, everybody is trying to have a great deal.”

The Reserve Bank of Australia kept the cash rate on hold at 1.5 per cent this month but there’s growing speculation there could be a drop following a sharp slowdown in economic growth during the second half of last year.

@sophieelsworth

TOP 5 VARIABLE INTEREST RATES

• Freedom Lend, Freedom Variable Principal and Interest, 3.44 per cent, monthly repayments $1337.

• Reduce Home Loans, Rate Lovers Variable, 3.47 per cent, monthly repayments $1342.

• Loans.com.au, Smart Home Loan, 3.48 per cent, monthly repayments $1344.

• Homestar Finance, Star Essentials, 3.49 per cent, monthly repayments $1345.

• Pacific Mortgage Group, Variable Principal and Interest, 3.54 per cent, monthly repayments $1354.

Source: Canstar, $300,000 30-year home loan, loan-to-value ratio 80 per cent, principal and interest repayments.

Originally published as Mortgage customers getting stung with rates around 6 per cent