ACCC: $850 annual savings on offer for borrowers willing to barter

Tom Watson

11 Dec 2018

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Australia’s premier consumer watchdog has today released a scathing assessment of the way some of the country’s largest banks ‘stifle’ price competition in the home loan market, to the detriment of their customers.  

The Residential Mortgage Price Inquiry Report, released by the Australian Competition and Consumer Commission (ACCC), found that a lack of transparency in home loan pricing from ANZ, Commonwealth Bank, Macquarie Bank, NAB and Westpac makes it difficult for borrowers to know how their rates compare.

This then reduces the willingness of many borrowers to shop around for a better deal.

RELATED: Crush your mortgage in 2019 with these top value home loans

“Pricing for mortgages is opaque and the big four banks have a lot of discretion. The banks profit from this and it is against their interests to make pricing transparent,” said ACCC Chair, Rod Sims.

The ACCC report found that while one of the most successful ways borrowers can go about reducing their home loan rate is by negotiating with their banks, many don’t realise that this is an option - particularly refinancers, those borrowers looking for a better deal on their existing mortgage.    

According to the report, borrowers with an average-sized mortgage could save up to $850 a year (initially) by negotiating to pay the same interest rate as the average new borrower at one of the major banks above.

“I encourage more people to ask their lender whether they are getting the lowest possible interest rates for their residential mortgage and, as they do so, be ready to threaten to switch to another lender,” said Sims.

“I am afraid that the threat of switching banks will often be necessary to achieve a competitive mortgage rate.”

Weighing up the rewards of switching

For mortgage holders who are are existing customers of a major bank, negotiating to a better deal is one thing, but how much could you save by switching providers altogether?

Mozo crunched the numbers and found that an owner-occupier borrower with a $400,000, 30 year home loan and an LVR of 80% would pay $24,552 a year on the average big four package rate of 4.58%.

The same borrower would pay $23,844 a year ($708 saved) on the average variable rate currently in the Mozo database of 4.33%, or just $21,396 a year ($3,156 saved) on the lowest variable rate currently in the Mozo database which is 3.44% (comparison rate: 3.51%).

According to Mozo Product Data Manager, Peter Marshall, one of the other hurdles holding many potential refinancers back is the time and effort involved.

“I don’t know anyone who loves dealing with paperwork, and the initial loan application process requires quite a lot of it. But when you’re refinancing you don’t actually have to wade through quite as much,” he said.

“At the end of the day you really just have to weigh up whether putting in a couple of hours of work is worth saving hundreds, if not thousands of dollars. It seems like a no-brainer.”

RELATED: Aussie borrowers dumping old bank loans

Weighing up refinancing your own home loan? Check out some of the great offers below, or head over to the Mozo home loan comparison hub for even more refinancing deals.

Home loan offers 2018 - rates updated daily

  • Promoted

    loans.com.au

    2.88% p.a.

    2.90% p.a.

    $1234

    Product details Close details
    Smart Home Loan

    A low-rate home loan that could save you thousands. No application or ongoing fees. Unlimited additional repayments. Unlimited free redraws with no minimum redraw amount, Limited time only.

    • $0.00

    • $0.00

    • yes - free

    • yes - free

    • no

    • 2.88% p.a.

    • 2.90% p.a.

    • $520

    • 80.00%

    • $50,000

    • $1,000,000

    • Variable

    • Principal & Interest

    • Owner Occupier

    • Weekly, Fortnightly, Monthly

    Read our Mozo Review to learn more about the Smart Home Loan

  • Promoted

    UBank

    2.84% p.a.

    2.84% p.a.

    $1234

    Product details Close details
    UHomeLoan - Discount Offer

    Free redraw with flexible repayments. Min 20% deposit. Winner of a Mozo Experts Choice Award 2019 in the Low Cost Home Loan category^.

    • $0.00

    • $0.00

    • yes - free

    • yes - free

    • no

    • 2.84% p.a.

    • 2.84% p.a.

    • $0

    • 80.00%

    • $200,000

    • -

    • Variable

    • Principal & Interest

    • Owner Occupier

    • Weekly, Fortnightly, Monthly

    Read our Mozo Review to learn more about the UHomeLoan - Discount Offer

  • Promoted

    ANZ

    3.24% p.a.

    3.28% p.a.

    $1234

    Product details Close details
    Simplicity PLUS Special Offer LVR <80%

    Low rate. No ongoing fees. Can make extra repayments & redraw. Min. 20% deposit. Apply by 31/01/20 and settle by 30/04/20 for $2,500 cashback on eligible refinanced loans of $250K+ (incl. any new lending). Offer terms, fees, charges and elig. criteria apply.

    • $0.00

    • $160.00

    • yes - free

    • yes

    • no

    • 3.24% p.a.

    • 3.28% p.a.

    • $0

    • 80.00%

    • $50,000

    • -

    • Variable

    • Principal & Interest

    • Owner Occupier

    • Weekly, Fortnightly, Monthly

    • Refinance by 31 January 2020 to receive up to $3,500 cash back depending on the loan amount with an ANZ linked transaction account.

    Read our Mozo Review to learn more about the Simplicity PLUS Special Offer LVR <80%

  • Promoted

    Suncorp

    3.03% p.a.

    3.04% p.a.

    $1234

    Product details Close details
    Back to Basics Special

    No monthly account keeping fee, no ongoing annual fee and no loan establishment fee on new lending of $150,000 or more. Only 10% deposit required.

    • $0.00

    • $350.00

    • Yes - free

    • first redraw per month free

    • no

    • 3.03% p.a.

    • 3.04% p.a.

    • $0

    • 90.00%

    • $150,000

    • -

    • Variable

    • Principal & Interest

    • Owner Occupier

    • Weekly, Fortnightly, Monthly

    Read our Mozo Review to learn more about the Back to Basics Special

  • Promoted

    Tic:Toc

    2.84% p.a.

    2.85% p.a.

    $1234

    Product details Close details
    Variable Home Loan

    Get full approval online. Award-winning platform could save you thousands with super-low rates. No application, valuation or settlement fees. Fee-free redraws and extra repayments. Optional offset account for $10 per month. Winner of a Mozo Experts Choice Award 2019 for Online Home Lender of the Year 2019.^

    • $0.00

    • $325.00

    • yes - free

    • yes - free

    • Optional - $10 per month

    • 2.84% p.a.

    • 2.85% p.a.

    • $0

    • 90.00%

    • $50,000

    • $2,000,000

    • Variable

    • Principal & Interest

    • Owner Occupier

    • Weekly, Fortnightly, Monthly

    Read our Mozo Review to learn more about the Variable Home Loan

*WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for the amount and term you entered.

**Initial monthly repayment figures are estimates only, based on the advertised rate, and a loan of $500,000 repaid over 25 years. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

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