Loyalty to the big four banks costs home loan customers billions

IT may seem like a better to be loyal to one of the four big banks — but it’s costing Australians more than $6 billion in savings.

Home loan

EXCLUSIVE

LOYAL home loan customers to the big four banks are costing themselves more than $6 billion in savings each year by failing to switch to lenders with much cheaper rates.

Despite some financial institutions offering rock-bottom mortgage deals with a “3” in front, Australians are wasting $17 million every day by sticking with the big banks and paying higher interest rates.

Data calculated by comparison website Mozo has revealed that based on the banks’ standard variable rates and their percentage of variable rate customers, if these borrowers switched to the lowest variable rate on the market offered at 3.84 per cent by online lender iMortgage, they would save themselves thousands of dollars per year.

The average standard variable rates on the big four range between 5.56 and 5.68 per cent.

The site’s spokeswoman Kirsty Lamont said borrowers were in pole position to negotiate better rates with opposing lenders.

MORE: Find the best home loan variable rate loan

“Often the customers who stick with the big banks end up paying the lazy tax and that can add up,’’ she said.

“The big banks charge high interest rates because they have trusted brands and they know there’s borrowers out there who are willing to pay a higher rate to save time of shopping around.

“Refinancing isn’t as hard as you think and there are huge savings to be made.”

Consumers are being urged to revise their mortgage deals — particularly after the big four lenders this month all announced they would be hiking up owner occupier interest rates despite the Reserve Bank keeping the cash rate at two per cent.

One of the nation’s largest mortgage broking firms Aussie Home Loans has seen a 16 per cent jump in demand for home loan refinancing compared to just a few years ago.

Founder John Symond said this slight uptick in borrowers switching to better deals signalled the competitive nature of the mortgage market.

“There is a great deal of attention now being paid to the future of interest rates, the property market and ongoing uncertainty over the economy,’’ he said.

“Even though rates have largely been coming down through RBA cuts and hot competition, borrowers are still seeking to refinance their loans.’’

However benign inflation results this week left inflation at just 1.5 per cent for the year to September and has resulted in strong predictions there will be a cut to the cash rate when the RBA board meets on Melbourne Cup next week.

POTENTIAL SAVINGS

Bank Ave SVR (including latest change) Customer’s annual savings Potential savings

CBA 5.6% $3636 $2.05 billion

ANZ 5.56% $3552 $1.36 billion

Westpac 5.68% $3816 $1.36 billion

NAB 5.6% $3636 $1.31 billion

TOTAL SAVINGS $6.08 billion

Originally published as Loyalty to the big four banks costs home loan customers billions