Homeowners face big bill to escape Westpac

WESTPAC customers take their mortgages elsewhere to take advantage of lower interest rates could be slugged $1750 in fees.

Calculating the cost of switching between the standard variable home loan of Westpac and NAB. Graphic: The Australian

WESTPAC customers who followed Kevin Rudd's call for them to take their mortgages elsewhere could be slugged $1750 in fees that would take up to three years to recoup through savings from lower interest repayments.

Westpac lifted its standard variable rate by 45 basis points last week, hours after the Reserve Bank raised the cash rate by 25 points.

The move prompted an immediate rebuke from Wayne Swan, while the Prime Minister said Westpac's customers "should be looking at where else they can do their banking", The Australian reports.

Westpac's standard variable rate is 6.76 per cent, the highest among the major banks, compared with NAB's 6.49 per cent, which is the lowest.

Analysis carried out for The Australian by Canstar Cannex found customers with a $300,000 mortgage who switched from Westpac to NAB would save $50.88 a month on their repayments.

But to exit a Westpac mortgage held for less than four years, customers would be forced to pay a $900 exit fee, a $250 discharge fee and then a $600 application fee for a NAB home loan.

For those with an average home loan, the $1750 cost to change banks would be recouped in 34 1/2 months, based on the $50.88 repayment savings each month.

"Westpac customers looking to refinance need to have a close look at their current loan to see whether it is a financially viable option," Cannex financial analyst Mitchell Watson said.

"A lot of borrowers when they refinance can be sidetracked by focusing solely on the interest rate and be blinded to the fees which go with this type of transaction."

The research found homeowners with a million-dollar mortgage would benefit more by switching between the two banks than those with an average loan.

Read more about banking inThe Australian.