New research suggests that close to half of mortgage holders are ready to switch from their current lenders to access the record low interest rates available elsewhere.
The problem is that the major banks and other lenders give the lowest interest rates to new customers and keep their existing customers on the higher rates – which is referred to in the industry as a “loyalty tax”.
In other words, if customers stay loyal to their lenders, they are punished, while new customers are rewarded with lower interest rates. RateCity.com.au research has found that the percentage of people keen to refinance had doubled in just two years, jumping from 19% after the banking royal commission in 2018 to 43% now.
RateCity says that owner-occupiers who don’t switch are wasting thousands of dollars on high mortgage costs, paying over 1 percentage point more than they need to.
RateCity research director Sally Tindall says the loyalty tax gets worse the longer you stick with your bank. “It’s taken a pandemic to get people to shift their mindset, but hopefully we’ll come out of it more budget-conscious and less complacent towards our mortgages,” she says. “People won’t just tolerate overpaying anymore.”