Lender loyalty is costing borrowers $4.5 billion a year, according to new data released by digital home loan platform Lendi.
The Lendi Loyalty Index has revealed that as mortgage holders are likely to feel more financial pain due to cost-of-living increases, there are ways to ease the pressure but more often than not, homeowners aren’t being told about it because it is not in the lender’s commercial interest to inform borrowers.
Lendi data reveals Australians are simply paying more than they need to be due to either lack of awareness or apathy as banks continue to charge new customers rates that are lower than rates charged to existing customers.
With interest rate rises being passed on consistently by lenders, Lendi says it’s important for Australians to know that they can avoid un-needed mortgage stress.
Lendi CEO David Hyman (pictured above left) said the data analysed showed on average banks were charging new customers rates that were 86 basis points lower than rates charged to existing customers, while the big four banks were charging new customers 91bps less.
“At 91bps you would be saving $70,000 over the life of a loan,” Hyman said. “This is an eye-popping number and for the most part it’s apathy that’s costing people. We encourage homeowners to speak to their broker to assess their options because by shopping around, they can save tens of thousands of dollars.”
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Hyman said in real-dollar terms, a difference of 91bps on a $500,000 loan equated to more than $2,500 savings per year or approximately $70,000 over the life of the loan.
“We encourage homeowners wanting to compare the difference and understand potential savings over the life of their individual loans to use free online repayment calculators,” he said. “By refinancing and saving on ‘loyalty tax’, mortgage holders could potentially reclaim the last two RBA rate increases. Homeowners should speak to their broker to assess their options as a simple conversation with a broker can save thousands per year.”
Hyman said the Lendi Group encouraged everyone to monitor their home loans and know exactly the position they are in to understand the steps they could undertake to minimise any financial pain.
“Our data shows that everyone should interrogate their mortgage and seek improvement given the substantial savings available. Australia has $130bn worth of fixed rates coming off next year, so there will be thousands of homeowners that might not be feeling the pinch now but should be preparing for the change to come through next year,” he said. “It’s never too early to start having these conversations.”
Senior Aussie mortgage broker Melanie Smith (pictured above right) said Lendi’s data illustrated that Australians were paying unnecessary mortgage costs when they could easily switch home loans to something that was better for their budget.
“In the current climate, it’s more important than ever for Australians to avoid unnecessary mortgage stress, so I would encourage mortgage holders to call their local broker to talk through the options that would suit them,” Smith said. “It’s amazing how a conversation can turn into real savings for your budget.”
