Home loan rates you should pay
BANKS are continuing to slash their home loan interest rates for new customers but are leaving existing borrowers out in the cold.
And mortgage deals are predicted to get even cheaper with two more potential rate cuts on the horizon — one tomorrow and another on Melbourne Cup Day, according to some economic forecasts.
But unfortunately for loyal customers they are being left on higher rates than new borrowers and are missing out on rock-bottom deals.
Analysis by financial comparison website RateCity found 15 lenders including Westpac, Citi, HSBC, Suncorp and ME, slashed owner occupier home loan rates in the past month for new customers, but not for existing borrowers.
One of the largest cuts was 0.93 percentage points by lender Citi.
According to a recent Productivity Commission report, loyal home loan customers paid about 0.3 to 0.4 percentage points higher than new-to-bank borrowers.
That is equivalent to about $66 to $87 in extra interest charges per month depending on the size of the loan.
So here’s how you can make sure you are not getting gouged by your lender.
Importantly, know your rate. The cash rate sits at a historical low of 1 per cent, but many economists have tipped two more cuts are on the way in the coming months. Recent research commissioned by lender UBank found three in four borrowers did not know their mortgage interest rate and could be dudding themselves out of tens of thousands of dollars.
For a borrower who is five years into a 30-year, $300,000 loan paying the average variable rate of 3.91 per cent, if they switched to the lowest variable rate of 2.89 per cent they could save themselves $48,933 over their loan term.
RateCity’s spokeswoman Sally Tindall said there were constant interest rate movements and customers must pay attention.
“Banks are actively out there cutting their interest rates for new customers,” she said. “But if you have been a loyal customer for some time you may be on a much higher rate than what they are offering new customers.”
She urged people to check their rate this weekend ahead of a potential rate cut tomorrow.