Staying loyal to your bank could be costing you $200 or more each month…..*

According to the Reserve Bank of Australia (RBA), the interest rate difference between a mortgage written for a new customer versus an existing customer is growing. First mentioned by the RBA in 2020, the average variable rate on established home loans was 4.44%. However, the average rate for new loans was just 3.96%. That means you as a customer are being stung for being loyal. A rate penalty if you like of up to 0.48%. And based on our own experience, the number of people being complacent with their mortgage & interest rate is increasing. 

The differential margin -also referred to as “loyalty tax”-, is the added interest existing customers pay in comparison to new customers. When rates go up, lenders will pass on the RBA increase plus a little extra to existing clients while only passing along the full rate increases to new customers. So it pays to know the rate your lender is passing along. Keeping an eye on what other lenders offer puts you in an even better negotiation position.

In order to get a better deal from your lender, contact your lender direct and request the same rate as they offer to new clients. Make sure you back it up with actual examples of lenders and rates. If your request is declined, consider talking to a broker and refinancing with another lender at a better rate. The benefits are lower repayments (saving money) or a shorter time to pay off the mortgage (saving time).

Are you considering refinancing your mortgage? We can help you find the best deal for your circumstances! Schedule a free consultation with our Loan Specialist. At Micah Finance Solution, we help our clients reduce their financial stress, let’s make that happen today. 

The $200 per month is based on a mortgage of $700,000 on 4.70% interest rate compared to 4.20% interest rate. The 0.50% difference is what existing customers pay vs. new customers.

Update on this post (Mar 16, 2023)

We have started a campaign “a better deal” which focusses on negotiating a better rate with your current lender. This started in Nov 2022. Since then we hace been able to achieve the following:

  • Mar 2023: Reduce the interest rate for a client from 7.02% to 5.39% – $580k loan – $550 per month saved
  • Feb 2023: Reduce the interest rate for a client from 5.64% to 5.24% – $240k loan – $60 per month saved
  • Jan 2023: Reduce the interest rate for a client from 6.42% to 4.84% – $270k loan – $273 per month saved
  • Dec 2022: Reduce the interest rate for a client from 5.04% to 4.59% – $612k loan – $160 per month saved