Athena calls out the 'loyalty penalty rort' costing Australian borrowers billions

By Tom Watson · · 3 min read
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Australian homeowners want to see change to the two-tier system in which many lenders prioritise new mortgage customers over old by way of lower interest rates.

A recent survey of 1,000 homeowners commissioned by online lender Athena found that 81% of respondents thought their lender gave better deals to new customers, leaving a significant proportion of mortgage holders feeling ‘ripped off’ and like they were being ‘penalised’ for their loyalty.

Furthermore, 36% of those surveyed said that they were rejected by their bank or lender when they asked for a lower rate.

As a result, over nine in ten homeowners believe that lenders should disclose the rates they are offering and provide both new and existing customers with the same rate on their home loan.

“Aussie homeowners are right to feel outraged and deserve better,” said Athena co-founder and chief executive, Nathan Walsh.

“This is fundamentally a breach of trust. Famous for being the land of the ‘fair go’, Australian homeowners are seeing the unfairness. They’ve been taken advantage of for too long and it’s time for change. Rates are at an all-time low at the moment so it’s at a crucial time when Australians need the money in their pockets, not the banks.”

The price of loyalty

According to an analysis of Reserve Bank data conducted by Athena, Australian borrowers who have remained loyal to their current lender will have forked out a cumulative ‘loyalty penalty’ of around $9 billion so far in 2021.

As Walsh explains, this is the difference between the interest rates paid by new and ongoing borrowers with the same lender.

“The RBA reported the average difference in new and existing customer pricing to be 0.46% for owner occupiers in June 2021. Sadly, for many customers it is even greater.”

As large as that $9 billion figure is, the impact of this loyalty penalty is perhaps more relevant on an individual level.

On a $400,000 loan, Athena says that a rate difference of 0.46% over 30 years would translate to $37,462 in additional interest over the life of the loan - or $1,249 extra per year.

“Aussie homeowners feel that their lender is taking advantage of them and are fed up,” Walsh said. “The loyalty penalty rort costs customers billions of dollars a year. We think it’s time for this practice to stop, and homeowners agree.”

A matter of effort vs savings

Athena is by no means the only voice drawing attention to the cost of loyalty (or lethargy) for home loan customers though. 

In December last year, the ACCC released a report drawing attention to the fact that a ‘significant number of borrowers’ were getting less competitive interest rates than they could be, which was likely costing them thousands of dollars in additional interest.

So why would borrowers not want to heed these calls and switch to a better rate? As Mozo Banking Expert Peter Marshall explains, the effort involved can be a deterrent, while some borrowers are simply not in a position to refinance. 

“While it’s easier than applying for a new loan, refinancing can still take a lot of effort, including going through an assessment process,” he says.

“And for some people refinancing is not possible because their situation may have changed meaning they may not be approved for a loan anymore. For instance, their income may have been reduced since they took the loan out or they may have taken on other debts.

“Ultimately I think it’s a trade off between the effort and stress involved versus the benefit of getting a lower rate, but there would be many people for whom it is certainly worth making that effort.”

There has been a recent uptick in the amount of loans being switched though. The ABS recently recorded a record high volume of refinanced mortgages, with $17.2 billion worth of loans switched during the month of July.

RELATED: Athena: The home loan lender that’s trying to GET RID of customers

Sick of the rate you're getting from your current lender? Check out some of the great rates available to refinancers in the table below (including Athena’s), or head on over to our dedicated refinance home loan comparison table to view even more offers.

Home loan comparisons on Mozo

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Last updated 27 July 2024 Important disclosures and comparison rate warning*

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  • Unloan Variable

    • Owner Occupier
    • LVR <80%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    5.90 % p.a.
    Initial monthly repayment
    $2,995
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    Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.

  • Basic Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.16 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Enjoy a low rate home loan with $0 application fee and $0 ongoing fees. Flexibility to split your loan and set different repayment types. Fee free redraw from your loan using online banking. Flexible ways to repay. 40% Deposit required.

  • Neat Home Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <60%
    Interest rate
    6.09 % p.a.
    Variable
    Comparison rate
    6.11 % p.a.
    Initial monthly repayment
    $3,027
    Go to site

    Competitively-priced variable rate loan. Ideal for owner occupiers and investors. No service fees to pay. Make free extra repayments and redraws. Flexible repayment schedule available.

  • Special Real Deal Home Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <80%
    Interest rate
    6.09 % p.a.
    Variable
    Comparison rate
    6.13 % p.a.
    Initial monthly repayment
    $3,027
    Go to site

    Refinancers or first home buyers pay no monthly or annual fees. Up to $3,000 cashback when you complete your home loan application online. $2,000 cashback on loans ≥$250K; or $3,000 cashback on loans ≥$500K. LVR ≤80%. T&Cs and credit criteria apply.

  • Optimum Fixed Rate Home Loan

    • Owner Occupier
    • Principal & Interest
    Interest rate
    5.69 % p.a.
    Fixed 3 years
    Comparison rate
    6.34 % p.a.
    Initial monthly repayment
    $2,899
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    Lock in a competitive interest rate and enjoy peace of mind for the fixed period. Available for owner occupied new and refinanced home loans with at least 20% deposit. Split option available as well as offset and redraw. Noapplication, ongoing or banking fees. Third Party fees may be applicable - payable within loan repayments. Extra repayments up to $20K per annum permitted. Apply online, 100% member owned credit union.

  • Unloan Variable

    • Owner Occupier
    • LVR <80%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    5.90 % p.a.
    Initial monthly repayment
    $2,995
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    Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.

  • OMG Home Loan

    • Owner Occupier
    • Principal & Interest
    • <60% LVR
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    6.02 % p.a.
    Initial monthly repayment
    $2,995
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    BCU Bank’s OMG owner occupied home loan offers a variety of great low rates depending on your deposit. Save with no ongoing annual fees. Access your extra payments when you need to through the redraw facility. Pre-approval valid for 3 months.

  • Flex Home Loan

    • Fixed
    • Owner Occupier
    • Principal & Interest
    • LVR <60%
    Interest rate
    5.99 % p.a.
    Fixed 3 years
    Comparison rate
    6.34 % p.a.
    Initial monthly repayment
    $2,995
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    Competitive Fixed rate. Multiple offset accounts available. Borrowers can also make extra repayments. Redraw facility available. Simple online application process. 40% deposit required.

  • Express Home Loan

    • Owner Occupier
    • Principal & Interest
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    6.01 % p.a.
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    6.14 % p.a.
    Initial monthly repayment
    $3,001
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    Get online approval from the award-winning Bendigo Bank Express Home Loan. Multiple offset accounts and redraw available. 100% offset on variable rate loans and partial offset on fixed rate. Flexible repayment options. New home loans only.

  • Neat Home Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <60%
    Interest rate
    6.09 % p.a.
    Variable
    Comparison rate
    6.11 % p.a.
    Initial monthly repayment
    $3,027
    Go to site

    Competitively-priced variable rate loan. Ideal for owner occupiers and investors. No service fees to pay. Make free extra repayments and redraws. Flexible repayment schedule available.

  • Special Real Deal Home Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <80%
    Interest rate
    6.09 % p.a.
    Variable
    Comparison rate
    6.13 % p.a.
    Initial monthly repayment
    $3,027
    Go to site

    Refinancers or first home buyers pay no monthly or annual fees. Up to $3,000 cashback when you complete your home loan application online. $2,000 cashback on loans ≥$250K; or $3,000 cashback on loans ≥$500K. LVR ≤80%. T&Cs and credit criteria apply.

  • Basic Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.16 % p.a.
    Initial monthly repayment
    $3,043
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    Enjoy a low rate home loan with $0 application fee and $0 ongoing fees. Flexibility to split your loan and set different repayment types. Fee free redraw from your loan using online banking. Flexible ways to repay. 40% Deposit required.

  • Flex Home Loan

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    • LVR <60%
    Interest rate
    6.14 % p.a.
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    6.38 % p.a.
    Initial monthly repayment
    $3,043
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    Competitive variable rate. Multiple offset accounts available. Borrowers can also make extra repayments. Redraw facility available. Simple online application process. 40% deposit required.

  • Offset Home Loan

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    6.39 % p.a.
    Initial monthly repayment
    $3,043
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    Ability to open up to 10 offset accounts per loan account. Fast online application. Linked Debit Mastercard® with fee-free access at ATMs across Australia. Package a credit card with your home loan and the annual card fee will be waived (T&Cs apply). 40% deposit required.

  • Basic Home Loan

    • Fixed
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    • LVR<70%
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    6.25 % p.a.
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    6.20 % p.a.
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    $3,079
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    No upfront or ongoing fees. Free extra repayments and redraw facility. Option to earn Qantas points. Min 30% deposit required. Borrow up to $10,000,000.

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    • Fixed
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    Interest rate
    6.25 % p.a.
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    6.42 % p.a.
    Initial monthly repayment
    $3,079
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  • Fixed Rate

    • Owner Occupier
    • Principal & Interest
    • <80% LVR
    Interest rate
    6.54 % p.a.
    Fixed 2 years
    Comparison rate
    7.10 % p.a.
    Initial monthly repayment
    $3,174

    Enjoy up to $3000 cashback for eligible first home buyers and $2000 cashback for refinancers on eligible home loans with the ANZ Fixed Rate Home Loan. Get the security of repayment certainty with a competitive locked in rate. No ongoing fees to pay. Offset account on 1-year fixed loans ($10/month fee applies). Interest-only payments allowed.

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* 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 $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. 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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