Time to demand a better loan rate

EVERY home loan customer in Australia should be paying an interest rate under 4 per cent or they are getting ripped off, experts have warned.

Home loan rates are continuing to tumble, leaving borrowers with a platter of historically low deals to choose from.

Some lenders are even offering variable rate mortgage deals with a “2” in front, but owner-occupiers get better deals than investors.

Financial comparison website Mozo’s analysis of the mortgage market showed the gap between principal and interest loans for owneroccupiers and investors is 0.42 percentage points.

The average owner-occupier rate is now 3.99 per cent compared with investors at 4.41 per cent.

The site’s spokeswoman, Kirsty Lamont (pictured), said it was up to borrowers to take matters in their own hands and demand a better rate from their bank, otherwise they should switch.

“The new magic home loan number is 3.5 per cent. If you are paying anything above that you are paying way too much,” she said.

“It’s time to get out there and compare some of the lower rates on the market, you can get variable rates now below 3 per cent so there’s some big savings on offer.”

The big four banks have continued to slash mortgage fixed rates this month.

The Commonwealth Bank, ANZ and Westpac are all offering owneroccupier customers paying principal and interest a threeyear fixed rate of 3.28 per cent, while NAB is offering customers a slightly higher rate at 3.29 per cent.

THE NEW MAGIC HOME LOAN NUMBER IS 3.5 PER CENT. IF YOU ARE PAYING ABOVE THAT YOU ARE PAYING TOO MUCH

KIRSTY LAMONT

Aussie Home Loans’ chief customer officer, David Smith, said the super-low interest rate environment “placed the power firmly into the borrower’s hands”.

“There’s no question that if your home loan rate starts with a 4 then you could be paying too much,” he said.

“There are plenty of home loans for both owner-occupiers and investors with interest rates in the 3 per cent range, and incredibly we’re now seeing rates fall into the high 2s with more lenders expected to follow suit.”

He urged borrowers to use a broker to help get a better rate and if the bank refuses, “then it’s game on”.