Most banks don’t reward loyalty so haggle for a better mortgage rate now or miss out on $850 a year in your pocket, the ACCC’s latest inquiry has found.
The Australian Competition & Consumer Commission Residential Price Inquiry – out today – has found that “only 11 per cent of borrowers with variable rate mortgages had the price of their current residential mortgage reduced by one of the five banks under review in the year to 30 June 2018”.
It found banks were generally not rewarding loyal customers, instead offering bigger discounts to new customers coming on board.
“As at 30 June 2018, an existing borrower with an average-sized mortgage could initially save up to $850 a year in interest if they negotiated to pay the same interest rate as the average new borrower at the five banks under review. For many borrowers the gain will be much larger,” the ACCC report said.
And it found that part of the reason for such a small take-up — and why banks have not moved to reward existing customers as much — was that it was hard to get information on better rates, let alone change deals.
Five banks were monitored between May 9 last year and June 30 this year with ACCC finding “unnecessarily high search costs or effort required by borrowers to find better prices”.
How to check if your loyalty is being taken for a ride:
1. Check the interest rate you are paying;
2. Check the rate your bank is offering new customers for the same product;
3. Use a comparison site like RateCity to find a list of 3 lenders willing to offer lower rates;
4. Call your bank and present them with the evidence. Use RateCity’s guide for how to haggle.
ACCC chair Rod Sims said: “Pricing for mortgages is opaque and the big four banks have a lot of discretion. The banks profit from this and it is against their interests to make pricing transparent.”
“Borrowers may not be aware they can negotiate with their lender on price, both before and, particularly, after they have established their mortgage.”
RateCity research director Sally Tindall said now was a good time for those on variable mortgages to haggle for the same rate as new customers.
“You’re entitled to haggle for that rate. Find out what your bank is offering new customers, and if its lower, ask them to match it. It’s the least they can do for a loyal customer.
“The slowdown in home lending has made the banks hungry for business. Owner occupiers paying down their debt are a hot commodity in this market and can use the competition to their advantage.”
Ms Tindall said NAB and ING were among those rewarding loyalty, recently raising rates for new customers only.
“NAB and ING should be singled out for putting their existing customers first. It’s a refreshing change after a year of rate hikes for existing homeowners.”
RateCity’s lowest ongoing variable home loan rates:
Reduce Home Loans 3.44 per cent
Easy Street Finance 3.49 per cent
Homestar Finance 3.49 per cent