Home loan customers paying owner-occupier rates starting with a ‘5’ in front
Unaware mortgage customers are getting slugged huge interest rates and paying more than double the best deals on the market. And many don’t realise they can negotiate a better rate.
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Exclusive: Unaware mortgage customers are getting slugged exorbitant interest rates and paying more than double the best deals on the market.
And worryingly only 57 per cent of borrowers were aware they could try and negotiate a better interest rate with their lender at any time, findings from home loan platform Lendi found.
Banking sources have revealed to News Corp that owner occupier customers making principal and interest repayments are paying rates as high as 5.58 per cent on their loan books.
This is nearly three per cent higher than the cheapest variable rate loans deals which start at just 2.69 per cent.
The Reserve Bank of Australia slashed the cash rate three times in 2019 and more reductions are strongly tipped this year.
The cash rate sits at just 0.75 per cent.
Home Loan Experts’ managing director Otto Dargan said many borrowers end up on their lender’s standard variable rate – the benchmark interest rate – if they fail to negotiate their loan.
This is often around 4.8 per cent.
“Usually this is because they don’t pay their annual package fee, they are on an old loan or their fixed rate expired and their loan reverted to the standard rate,” Mr Dargan said.
“Banks are never going to call you to tell you that your rate isn’t competitive so it’s important that you check your loan on a regular basis and negotiate a lower rate or refinance to another lender.”
For a $300,000 30-year owner occupier home loan with a rate of 5.58 per cent, a borrower would pay $322,200 in interest charges over the loan term.
On the same loan and a rate of 2.69 per cent the customer would pay just $184,800 in interest charges.
This is a saving of $137,400 in interest charges.
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Lendi’s co-founder David Hyman said there was a “lack of transparency” around the process to renegotiate a home loan.
“It can be easy to switch lenders,” he said.
“Typically the best time to do this is in the new year.
“Owner occupier principal and interest borrowers should be should be on deals in the 2’s or early 3’s range.”
Aussie’s chief executive officer James Symond urged borrowers to do a simple check of their loan rate – this could be easily done by logging in online or contacting the bank.
“Some borrowers may be paying more than they should be with some still on rates above 5 per cent when they could be around 3 per cent for a principal and interest loan,” he said.
“However the reality is no matter what rates you are currently on, you can regularly check if your current lender can sharpen their pencil and give you a better deal.”