WA dad to save $8400 a year by switching banks ahead of RBA interest rate hike

He’s raising his 10-year-old daughter by himself but he’s found a way to save $8400 annually at a time when “every cent matters”.

Hundreds of thousands of Aussies are “sitting on the edge of a cliff” as up to $400 billion worth of fixed interest rate mortgages are set to expire over the next few years.

It’s coming at the worst possible time for many homeowners, with multiple interest rate hikes on the horizon as cost of living bites — possibly as soon as the upcoming Tuesday, several big banks have warned.

However, Western Australian single dad Michael Brooks has found a loophole and will be saving himself a nifty $8400 a year.

The 44-year-old single dad from Perth realised the three-year fixed loan for his home was about to come to an end. But when he looked into refinancing options he was “appalled”.

His bank was essentially charging him a “loyalty tax” where they were offering him a 4.19 per cent rate for a renewal — even though they claimed they could give 3.19 per cent on their website.

“If they can’t give a customer of 20 years their best advertised rate, they don’t deserve my business,” Mr Brooks told news.com.au.

Michael Brooks with his 10-year-old daughter.

In January Mr Brooks turned his back on his long-time bank and joined a small digital lender called Nano who could give him a 2.59 per cent rate.

“Compared to where I started with I saved over $700 a month,” he said.

This translates into $8400 saved a year — or $25,200 still in his pocket over the three-year period. And he pointed out as a single dad with cost of living on the rise, every dollar counts.

“I am a single dad and I’ve got one income, I’ve got to keep the house I live in maintained … Every cent matters,” he explained.

“As interest rates rise, it will curtail the discretionary spending, it might mean putting off upgrading the car for a few years. The interest rate rises might just mean I’ve got less buffer there if the unfortunate happens.”

With this in mind, he gladly switched lenders.

Nano says around 75 per cent of their refinancing demand is coming from traditional banks while 56 per cent of these refinancing applications alone came directly from major banks.

“It’s about the bank being transparent,” Mr Brooks added.

Michael Brooks felt like he was being punished for being a long-term customer.

Even though the RBA hasn’t lifted the cash rate since November 2020, several banks have already jacked up their fixed rates in anticipation of the impending announcement.

Some have also slashed their variable rates to entice borrowers back into the fold.

For instance, the Commonwealth Bank raised its three-year fixed mortgage rate last month by 0.3 per cent to 3.79 per cent, which is now more than 1.5 per cent higher than the variable rate offering.

NAB and ANZ – Australia’s third and fourth largest banks – also hiked fixed interest rates on owner-occupier loans by up to 0.4 percentage points.

Interest on a one-year fixed rate for both ANZ and NAB is now 2.99 per cent, while five-year fixed rates are also identical at 4.49 per cent.

RateCity.com noted it was the seventh time NAB had hiked fixed rates in the last six months and the sixth time for ANZ in the same period.

As recently as September the big four banks offered three-year fixed rate home loans of between 1.98 per cent and 2.19 per cent.

Now those rates are between 3.59 per cent and 3.79 per cent.

He’s calculated that he’s saved himself $700 a month from his decision.

While the RBA’s previous stance had been to hold interest rates until 2023, data showed that the cost of living had hit a 22-year high, rising to 5.1 per cent from the year to March.

This has left the RBA with little choice but to hike up rates multiple times this year.

Three major banks are predicting an interest rate rise will hit as early as next Tuesday.

ANZ, NAB and Westpac have both predicted a 0.15 per cent rise at the start of May.

It will be the first time the interest rates have risen in 11 years.

The Commonwealth Bank has also forecast a 0.15 per cent rise but for June, although there have been chilling warnings that interest rates could hit 2.5 per cent in total by the end of the year.

Andrew Walker, CEO and Founder of Nano, warned that Australians are “sitting on the edge of the cliff of the fixed rate roll over”.

“The Commonwealth Bank of Australia alone is expected to have a whopping $53 billion of fixed rate mortgages rolling over into variable rates in the second half of 2023,” he said.

“Assuming the other major banks mirror the same structure as the CBA, we could expect to see $400 billion in fixed rate mortgages rolling off into a variable interest rate in the next couple of years.”

Originally published as WA dad to save $8400 a year by switching banks ahead of RBA interest rate hike