Why your home loan should start with a three

For years now, I’ve been asked for my best advice to save money. And for years, I’ve been offering the same answer.

Stop what you’re doing right now and check your mortgage interest rate.

If you don’t have a “3” in front of that interest rate, you’re being taken for a ride.

Numerous Australians are being absolutely duped, according to a sensational report from the ACCC earlier this month.

Thanks to the royal commission, we’ve spent much of this year learning how our super accounts are being raided by too-high fees and poor returns. Our super nest eggs may be growing, but it is in property that most Australians are still most heavily invested.

And it turns out our mortgages need constant vigilance too.

The big four banks are charging their existing borrowers interest rates up to 32 basis points higher than those they offer to new customers. That’s an extra $850 a year, adding up to tens of thousands of dollars over the life of a loan, in today’s dollars.

The same “set and forget” mentality that rules our super is also affecting our mortgages.

And it’s not entirely our fault.

Lenders deliberately make it hard for us to shop around for a good deal, according to the watchdog, providing poor upfront information to borrowers on available discounts and requiring them to jump through many hoops to obtain a proper quote.

No wonder, according to one bank survey, 70 per cent of its borrowers obtained only one quote before deciding on their home loan.

So, how does your mortgage compare?

For those of you checking your statements, here is what the average owner occupier, paying off principal and interest on a standard variable residential mortgage, is paying: 4.06 per cent at Commonwealth Bank, 4.13 per cent at Westpac, 4.05 per cent at ANZ and 4.14 per cent at NAB.

So, even without shopping outside the majors it’s possible to get a “3” per cent interest rates. And that’s before considering other lenders.

There are three quick and efficient ways to get a better deal:

  1. Just ring up your lender and ask for one, either a lower interest rate and/ or lower fees.
  2. If you can be switched to a cheaper product within the same lender.
  3. And, if both of those fail, be prepared to walk away and switch lenders by contacting a mortgage broker to get a better deal for you.

Despite all the bad headlines over the last year, just 4 per cent of borrowers on variable rate loans actually switched their loan to a new lender last financial year.

But 11 per cent were able to obtain a reduction in their interest rate or reduced fees, either through a bank offer or by threatening to quit.

Even a tiny 10 basis point discount can add up to thousands of dollars over time.

So, don’t wait another week. Better yet, get on the phone right now.

Belinda (ex- Macquarie Bank) is an accredited Finance Broker and holds a bachelor of Communications (minor in Business). She has accumulated over 10 years of banking and lending experience across credit, sales and senior manager roles. Belinda combines her passions of finance, business, property and people to provide an enriched client experience and takes the time to investigate and understand what is required for each of her clients.
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