State vs state on interest

Lenders charge different rates because of location

MORTGAGE lenders are charging different interest rates across the states with some borrowers repaying up to $15,000 more than their interstate counterparts.

According to a new analysis, economic, employment and housing market conditions have led to interest rate variations with one analyst warning the gap between states looks set to get even bigger.

According to new research by mortgage settlement company HashChing, the average owner-occupier mortgage issued in NSW during the past 12 months had an interest rate of 3.96 per cent, compared with South Australia’s 4.06 per cent.

The rate in Queensland was 3.99 per cent.

However, the gap widens when just the big four banks are compared. Although South Australia still had the worst interest rate at a slightly higher 4.08 per cent but Victoria outdid NSW with the lowest at 3.93 per cent with Queensland at 3.96 per cent.

“The repayment gap with a big-four mortgage between South Australia and Victoria is $15,400, based on a $500,000 loan over 30 years,” HashChing spokesman Mandeep Sodhi, pictured, said yesterday.

“Across all lenders, the repayment gap between South Australia, the most expensive, and New South Wales, the cheapest, is $10,400,” Mr Sodhi said.

“Typically, the larger loans in Victoria and NSW get you a better discount as the lenders, particularly the big four, discriminate against smaller loans,” he said.

“However, the economy and the direction of the housing market in each state also play a part.

“In Western Australia house price falls bottomed out during the year, so lenders started to offer lower interest rates in that state again.”

Competition between lenders was also another factor in the different rates, according to home loan analyst Digital Financial Analytics.

“There are multiple factors driving rates in various states, as well as overarching issues forcing rates higher,” DFA principal Martin North said yesterday.

“Different rates are thanks to the type of loan, the geographic location, relative risks, the competition landscape and the bank’s own portfolio management.”

The big banks typically rely on about 30 per cent of the money used for loans to come from international sources.

The rise in US interest rates means this will force many banks to increase their local interest rates.