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

    UBank

    2.59% p.a.

    2.59% p.a.

    $1234

    Product details Close details
    UHomeLoan - Discount Offer

    Enjoy a super low rate, $0 fees and easy application with the Mozo Experts Choice Home Lender Bank of the Year.^ Free redraw with flexible repayments. Min 20% deposit.

    • $0.00

    • $0.00

    • yes - free

    • yes - free

    • no

    • $0

    • 2.59% p.a.

    • 2.59% 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

    loans.com.au

    2.57% p.a.

    2.59% p.a.

    $1234

    Product details Close details
    Smart Home Loan 80

    A low-rate home loan that could save you thousands, with no ongoing fees plus unlimited extra repayments and free redraws. Mozo Experts Choice Low Cost Home Loan 2020.^ 20% deposit required. Limited time only.

    • $0.00

    • $0.00

    • yes - free

    • yes - free

    • no

    • $520

    • 2.57% p.a.

    • 2.59% 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 80

  • Promoted

    Bank of Queensland

    2.69% p.a.

    2.86% p.a.

    $1234

    Product details Close details
    Economy Home Loan Discount Rate

    An ongoing low variable interest rate with free redraw, flexible repayment options and one free valuation. Discounted Economy variable rate available for owner occupier lending with max LVR of 70%.

    • $10.00 monthly

    • $320.00

    • yes - free

    • yes

    • no

    • $450

    • 2.69% p.a.

    • 2.86% p.a.

    • $450

    • 70.00%

    • $150,000

    • -

    • Variable

    • Principal & Interest

    • Owner Occupier

    • Weekly, Fortnightly, Monthly

    • $2,500 cashback when you refinance your home loan to BOQ, min $250,000, 70% LVR or less. Apply before 15 August 2020, settle by 31 October 2020.

    Read our Mozo Review to learn more about the Economy Home Loan Discount Rate

  • Promoted

    HSBC

    p.a.

    2.95% p.a.

    $1234

    Product details Close details
    Fixed Rate Home Loan

    Have the security of a fixed rate for 2 years with the option to split with one of the HSBC variable Home Loans. No ongoing monthly service fees or annual fees. Mozo Experts Choice Fixed Home Loan 2020^

    • $0.00

    • $300.00

    • yes - free up to $10,000 p.a.

    • no

    • no

    • $0

    • p.a.

    • 2.95% p.a.

    • $0

    • 80.00%

    • $50,000

    • $7,500,000

    • Fixed

    • Principal & Interest

    • Owner Occupier

    • Weekly, Fortnightly, Monthly

    Read our Mozo Review to learn more about the Fixed Rate Home Loan

  • Promoted

    Homestar

    2.39% p.a.

    2.39% p.a.

    $1234

    Product details Close details
    Star Essentials Home Loan

    Low Cost Home Loan 2020 winner.^ Packed with essentials like free redraw and extra repayments. No ongoing fees. Borrow $150K+. No construction loans. Fee waiver special offer - ends 31st July 2020.

    • $0.00

    • $535.00

    • yes - free

    • yes - free

    • no

    • $0

    • 2.39% p.a.

    • 2.39% p.a.

    • $0

    • 80.00%

    • $150,000

    • $850,000

    • Variable

    • Principal & Interest

    • Owner Occupier

    • Weekly, Fortnightly, Monthly

    • Upfront fees waived up to $250 for valuation and up to $265 for legal documentation for applications received by 30 June 2020 and settled by 30 September 2020.

    Read our Mozo Review to learn more about the Star Essentials 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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