Turns out I’m not the only one, with 82% of Australian homeowners feeling ‘ripped off’.
Mortgage rates are extremely low right now, but many borrowers are short of them. Including me.
I have been writing about home loans for over 4 years. I look at mortgage rate data and talk to experts every week. I don’t have much fun at parties but I know what a good deal looks like on a home loan.
And yet when I look at my lender’s website I see that they are offering an interest rate of less than 2.00% on the same home loan I have. But they charge me over 2.50%!
I got my home loan over a year ago. At the time, it was one of the lowest rates on the market. But as the rates continued to fall, my lender lowered the rates to attract new customers. By leaving me outside in the cold.
Here’s how much I’m losing with a higher rate (the numbers below are adjusted for the sake of privacy and were calculated using Finder’s loan repayment calculator):
- Loan: $ 500,000 over 30 years
- Current rate: 2.55%
- New lending rate: 1.90%
- Monthly repayments at 2.55% = $ 1,988
- Monthly repayments at 1.90% = $ 1,823
- Difference = $ 165 per month or $ 1,980 per year
I pay $ 1,980 more a year for nothing!
And I am not alone. Research by lender Athena shows that 82% of Australian homeowners feel ripped off by lenders offering better deals to new customers. 91% said they want their lenders to disclose the rates they are offering to new customers versus existing customers.
“We have clients who come to us all the time telling us that their bank will not offer them the same rate as the advertised rates. [for new customers], ” Zippy Financial mortgage broker Louisa Sanghera told Finder.
“They feel disappointed and don’t understand why their bank isn’t looking after them, even though they have been loyal customers for years.”
I decided to call my lender to ask for a better deal. But first, I asked Sanghera for some advice.
âDon’t just talk to customer service, speak directly to the customer loyalty team,â Sanghera suggested. “Loyalty teams have better rates available than staff working over the phone in the customer service team. And always tell them that you are also talking to a broker to compare offers.”
âThen you can say, ‘I don’t want to refinance, but I won’t have any other alternative if I can get a better deal.’ “
Easier than you think
So I called my lender. There was no direct line to the customer loyalty team, but there was a helpline for existing customers. I told them what my current rate is and told them that I wanted them to give me the lowest rate advertised on their website.
I prepared for an argument. I had the maths written. I had prepared a little spiel on âhaving no choice but to switch to a cheaper lenderâ.
But after a minute of input, the customer support worker simply said that he had forwarded my request to the retention team. “You should have your rate adjusted within 3 business days.”
And that was it. The hardest part was remembering my banking password over the phone.
How can borrowers avoid getting caught by their lenders?
One thing you can do is regularly check the market interest rates and your own lender’s website to make sure your rate is still competitive.
Unfortunately, there’s nothing stopping your lender from offering better deals to new customers and leaving you with a higher rate. While many lenders will lower rates if you ask, you really have to ask.
Currently, the only lender who promises to give all clients the same interest rate on the same loan is Athena.
âAustralian homeowners feel their lender is taking advantage of them and are fed up with it,â said Nathan Walsh, CEO of Athena. “The loyalty penalty costs customers billions of dollars a year. We believe it is time for this practice to end.”
Sanghera said borrowers who have a mortgage broker also have an advantage. “The beauty of having a broker is that they will revise your rates for you and keep your rate competitive. If your bank or your product becomes expensive, they will recommend that you move.”
But you can also do what I did and go directly to your lender. Honestly, it only took me 20 minutes, and most of it was on hold.
Need a mortgage? Check out some of the lowest rates on the market and read our guide to refinancing home loans.