Home loan interest 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 on Tuesday 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.


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 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.

RateCity spokeswoman Sally Tindall said borrowers should check the rate they are paying on their home loan.
RateCity spokeswoman Sally Tindall said borrowers should check the rate they are paying on their home loan.

"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 on October 1 to determine whether or not they are getting a good deal.

"Check your rate ahead of Tuesday and if the Reserve Bank cuts rates then you will be well placed to know how competitive your rate is," Ms Tindall said.

"If you're an owner occupier paying principal and interest you can find rates as low as 2.89 per cent with smaller lenders, but you can also find rates as low as 3.35 per cent from one of the big banks."


Rob McEwan, 39, and his wife Christine, 36, purchased their three-bedroom home in Seaford in Melbourne's southeast three years ago.

The electrician said they are paying 3.96 per cent on their $370,000 loan but if the RBA cuts the cash rate on Tuesday and their lender AFG Home Loans doesn't pass it on, they might be forced to leave.

"If they don't lower our rate we are going to change lenders, but I thought I'd wait and see until the next rate cut to see whether we should refinance," Mr McEwan said.

"I would be happy with a rate around 3.5 per cent."

Rob and Christine McEwan with their baby daughter, Matilda, outside their Seaford house. They recently refinanced their loan to save money.
Rob and Christine McEwan with their baby daughter, Matilda, outside their Seaford house. They recently refinanced their loan to save money.

The pair's monthly repayments are about $2000.

Customers don't always have to jump banks to save, it could sometimes just involve calling up their existing lender and demanding a better deal.

Borrowers should ask to speak to their bank's mortgage retention team and tell them they could score better rates with other institutions.

In many cases the bank would do their utmost to keep the customer happy because it's much harder to get new customers than to keep existing ones.

If a customer's existing bank does not come to the party then they should be prepared to leave.


Customers should be wary of discounted rates that might seem appealing in the first instance but could leave the customers not so well off in the long run.

MORE: Big four bank's significant home loan change

MORE: We saved $300 per month on our mortgage

Banks often spruik to customers the heavy discounts they are getting off the standard variable rate - the benchmark rate set by the bank - to make customers feel like they are getting a fantastic deal.

But mortgage broking firm Aussie's chief executive James Symond warned customers to be wary of heavily discounted rates.

"It's important to be aware that these discounted rates might only last for a short time," he said.

"They may come with restrictions, charges, and honeymoon rates which can expire a short time into a 30-year loan period.

"Discounted rates look appealing to customers, but it's important to not take your eye off the comparison rate, which takes into consideration the fees and charges and is the true cost of the loan."

* Scott Pape is on leave.



• Reduce Home Loans, 2.89 per cent.

• Mortgage House, 2.89 per cent.

• Well Home Loans, 2.97 per cent.

• Homestar Finance, 2.99 per cent.

• Tic Toc, 2.99 per cent.

• Pacific Mortgage Group, 2.99 per cent.



• ANZ, 3.38 per cent.

• Commonwealth Bank, 3.35 per cent.

• National Australia Bank, 3.35 per cent.

• Westpac, 3.38 per cent.

Source: RateCity data, on a $300,000, 30-year owner occupier principal and interest loan.