How much is an OLDER MORTGAGE costing you?
When it comes to mortgages, customer loyalty doesn’t seem to pay off.
A home loan price inquiry by the ACCC has found that those with older mortgages are paying significantly higher interest rates than new borrowers, which is costing them thousands of dollars.
Those with a mortgage between three and five years old are paying on average about 0.58% more in interest than the average rate charged on new loans.
This means that a borrower with a loan balance of $250,000 could be saving $1,400 in interest in the first year simply by switching to a new loan that has the lower, average rate on new loans.
Over the remaining term of the loan this could result in a saving of more than $17,000 in interest.
The difference between the interest paid on new and existing loans seems to increase the older a loan gets.
The gap is much wider for those with a loan more than 10 years old, with the ACCC report finding that they could be paying about 1.04% more in interest than new borrowers.
What’s the solution?
The ACCC has made a number of recommendations to help close the interest rate gap between new and old customers, including making it easier to switch loans as well as the requirement that customers be provided with annual reminders to review their rate.
However one of the easiest ways for mortgage holders to ensure they are getting the best deal is to regularly review their rate and talk about their options with their current lender.
It’s well worth taking the time to find out the current interest rates on the market and chatting to your lender to see if they can improve what they’re offering.
If they can’t then it may be worth doing a bit or research and considering the option of switching your home loan if it’s going to result in a better outcome for you.
