Aussies are wasting thousands of dollars on ridiculously high interest rates, experts warn

Home loan customers can be left paying exorbitant interest rates that cost them tens of thousands of dollars more on their mortgage.

Unaware borrowers are paying ridiculously high interest rates of more than six per cent, costing them tens of thousands of dollars extra every year.

Mortgage brokers have told News Corp Australia that borrowers are unwittingly being left off banks’ standard variable rates without realising.

In some worst-case scenarios, these rates could be more than double the cheapest rates available.

The Reserve Bank of Australia governor Dr Philip Lowe is strongly tipped to slash the cash rate on Tuesday to a record low of 0.75 percentage points, after continued weak economic data locally and globally.

Canstar figures found for borrowers paying rates as high as 6.3 per cent, if they switched to the lowest rate of 2.89 per cent five years into a 30-year loan, they would save $163,000 over the remaining term.

Home loan customers are being urged to check the deal they are on at least once a year.

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Home Loan Experts’ managing director Otto Dargan said too many borrowers were complacent about their mortgage rates, and got stung by failing to pay the annual fee on their account.

“The banks often take advantage of them by playing games with their interest rates,” Dargan said.

“In most cases, this is because they don’t pay their annual fee for a professional package and then their discount is cancelled so they are paying the bank standard variable rate which is over 5 per cent.

“Another example is when someone’s fixed rate expires then they often revert to a high variable rate rather than the cheaper rates that new borrowers get.”

He said customers with insufficient funds often let the annual fee lapse, which removed any discounts on their loans.

Experts are opening up on how to save money when it comes to confusing mortgages.

But if the RBA does move the cash rate on Tuesday, experts say lenders are likely to pass it on in full.

Mortgage Choice broker James Hasselle said he regularly saw customers with interest rates starting with a “6” seeking out cheaper deals.

“If people have let their loans slide they could be left on horrific old pricing and if they are used to paying the repayment they don’t look at it,” he said.

“Unless you are getting your loan approved every year you don’t know what rate you are paying.”

Mr Hasselle said borrowers should check their home loan rates annually.

Canstar’s money commentator Effie Zahos said the best deals were only given to the savvier customers.

“The best rates will only go to those who act for themselves, getting among the competitive rates by talking to their current lender or approaching alternatives,” she said.

“It’s important that borrowers understand the interest rate they’re paying on their home loan as they are some exorbitant rates out there and a 2.64 per cent difference between the lowest and highest variable rates.

STANDARD RATES AVAILABLE

ANZ: Variable 4.93 per cent

Commonwealth: Standard Variable Rate 4.93 per cent

NAB: Tailored Variable 4.92 per cent

Westpac: Rocket RepayHome Loan 4.98 per cent

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Originally published as Aussies are wasting thousands of dollars on ridiculously high interest rates, experts warn