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Are You Too Loyal for Your Own Good?

The average Australian homeowner is paying more than $37,000 in extra interest over the life of their home loan due to the loyalty tax, and it has got three-quarters of borrowers feeling ripped off and angry. 

So, What is the Loyalty Tax? 

It is the sneaky lender trick where borrowers with older mortgages are typically charged a higher interest rate than borrowers with new loans, and it was confirmed in a study by the Reserve Bank of Australia (RBA) in 2020. The banks don’t think you are paying attention, so they only offer their lowest rates going to new customers to win them over.  

The RBA June 2021 figures show the average difference in home loan interest rates between new and existing owner-occupier borrowers was 0.46%. On an average loan size of about $400,00, that 0.46% difference on a 30-year-loan means a borrower would pay an additional $37,462 in interest over the life of the loan. That is $1,249 per year, per household. 

Borrowers are Feeling Ripped Off and Angry 

It should be no surprise that 91% of borrowers want new and existing customers to receive the same rate, according to a survey of 1,000 homeowners undertaken by CoreData and commissioned by Athena. The vast majority of those surveyed say they also feel “ripped off” (82%), “angry” (74%) and “outraged” (72%) at this pricing practice.  

You Don’t Need to Feel Trapped 

The ACCC published a report in December 2020 where there were several recommendations that would prevent this unfair practice, but nothing much has come out of it since. More than half (56%) of those surveyed say they feel trapped in their current deal, while one-in-three people (36%) asked their lender for a drop in their interest rate but were rejected.  

Competition amongst lenders is quite fierce right now – so… the power is in your hands!  

Rates are at an all-time low, so it is a crucial time when Australians need the money in their pockets, not the banks. Well-informed borrowers can negotiate a larger discount on their existing lender, without the need to refinance their loan.  

We always have your back. If you have not refinanced recently, get in touch today and we will work with you to help save you thousands of dollars in interest repayments. This may involve negotiating with your current lender or looking around for another lender who will give you a better rate.  

Phone: 1300 855 022
Email: clientservices@zippyfinancial.com.au   


Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.    

About the Author:     

Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.     

Connect with Louisa on Linkedin.    

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).  

Disclaimer:This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial.    

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