Home loan customers urged to check their interest rate twice a year to save

AUSTRALIANS should be paying an interest rate that is only being offered to new home loan customers in some cases, or they are being taken for a ride.

OWNER occupier home loan customers should be paying an interest rate under 3.7 per cent or they are getting ripped off.

More than 20 financial institutions have this year dropped their variable rates even though the official rate hasn’t budged.

But the reductions — as much as 75 basis points — are only being offered to new customers.

Those already on the books are now being urged to demand the same offers to claw back thousands of dollars.

The Mortgage and Finance Association of Australia’s chief executive officer Mike Felton said borrowers needed to review their home loan twice a year to ensure they weren’t paying too much.

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Mortgage and Finance Association of Australia chief executive officer Mike Felton said borrowers should review their loan twice a year.

“You need to be alert of what interest rates and fees are available in the industry,’’ she said.

“Sometimes the best deal isn’t always the home loan with the lowest interest rate, but unfortunately customers don’t always have time to review their loans.”

Half of all lenders are offering owner occupier principal and interest deals under 3.7 per cent, new data from financial comparison site Mozo shows.

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Existing customers should check what their lender is giving new customers and if they are not getting the same deal they should contact their institution and ask to speak to the retention team to demand the same rate.

Home loan customers save tens of thousands of dollars in interest if they switch to a deal with a cheaper interest rate.

Mozo data found on a $300,000 30-year home loan with a loan-to-value ratio less than 80 per cent, the lowest available rate is by Reduce Home Loans at 3.39 per cent and monthly repayments are $1329.

For a customer paying the average variable rate of 4.35 per cent, if they switched to this cheapest offering that would save nearly $60,000 in interest repayments.

Mozo spokeswoman Kirsty Lamont said competition in the mortgage market was fierce and customers should be jumping in on the action.

Mozo spokeswoman Kirsty Lamont said owner occupiers should be paying an interest rate below 3.7 per cent.

“Many of these rate cuts may not be available to existing borrowers,’’ she warned.

“They should double check their mortgage rate and make sure they are not paying anywhere over 3.7 per cent.

“If you are paying more than that then it’s definitely time to review your options and look to refinance.”

The Reserve Bank of Australia board kept the cash rate on hold at 1.5 per cent this month.

It hasn’t moved since August 2016.

@sophieelsworth