Big bank loyalty costs borrowers as online lender rates hit record lows


A number of recent cuts from online lenders has highlighted the rate premiums many Australian homeowners, including big bank customers, may be paying on their home loans.

In the past week two online lenders, Tic:Toc and Well Home Loans, have both reduced their respective variable interest rates to new lows, placing them among the sharpest rates around.

Yesterday Melbourne-based lender Well Home Loans announced that it would be reducing its Well Balanced variable rate by 18bp to a new low of 1.99% (2.02% comparison rate*) for owner occupiers. 

Meanwhile, Adelaide-based lender Tic:Toc recently cut 15 basis points off of its Variable Home Loan, meaning it’s new rate sits at just 1.89% (1.90% comparison rate*) for owner occupier borrowers. 

The home loan rates from both lenders now rank among the very lowest in the Mozo database, with Tic:Toc’s new rate being the lowest ever recorded in the database for an 80% loan-to-value ratio (LVR).

Lowest variable rates - Mozo database (July 14, 2021)^^

1.89% (1.90% comparison rate*)Tic:TocVariable Home Loan
1.99% (1.99% comparison rate*)Reduce Home LoansRate Lovers Variable
1.99% (2.02% comparison rate*)Well Home LoansWell Balanced
2.04% (2.04% comparison rate*)Pacific Mortgage GroupStandard Variable
2.04% (2.09% comparison rate*)HomestarStar Essentials

Is loyalty proving costly?

According to figures from the Australian Bureau of Statistics (ABS), Aussie mortgage holders refinanced a considerable $335 billion worth of home loans in the 12 months to May 2021 - the highest level in years.

Yet not all borrowers seem as enthusiastic to take advantage of the low rates currently on offer by refinancing.

Research commissioned by Mozo earlier this year found that 45% of borrowers with one of the Big Four (ANZ, CBA, NAB and Westpac) would stay loyal to those banks despite knowing that they could get a better rate with a smaller lender. 

A comparison of the average Big Four variable rate (3.53%^^^) with Tic:Toc’s variable rate of 1.89% (1.90% comparison rate*) shows just how much in the way of savings some homeowners could be missing out on though. 

On a $400,000 loan over a full 30-year term the difference between those two rates equates to $124,672 in extra interest paid, or about $4,155 each year. 

“Blind loyalty to the big banks could be costing Australians a small fortune at a time they can least afford it. Unfortunately many borrowers are needlessly opting to pay a significant premium on their mortgage because they believe bigger lenders are a more secure option,” said Mozo spokesperson, Tom Godfrey. 

A third of major bank customers that took part in the Mozo survey said that they wouldn’t switch to a smaller lender due to the security the big banks provide. 

For many, this concern will be related to the safety of funds held in offset accounts. But it's worth noting that deposits in an offset account with a bank lender of up to $250,000 are guaranteed under the government’s Financial Claims Scheme

That also applies to some non-bank lenders such as Tic:Toc and Well Home Loans - both of which provide offset accounts with their home loans which are secured by authorised deposit-taking institution Bendigo and Adelaide Bank.

“Tic:Toc and Well Home Loans are the latest ADI supported online lenders to turn the heat up on the big four, by dropping their variable loan rates in the past week,” said Godfrey.

“There’s never been a better time to compare interest rates, switch and save on your home loan, and while many people are refinancing, failing to do a little research and look behind the top end of town might mean you’re missing out on savings.”

RELATED: Home loan rate check: How do ANZ, CBA, NAB and Westpac compare?

Ready to see if you can refinance your mortgage to a lower rate? Check out some of the great offers in the table below, or head over to the Mozo refinance home loan comparison table to view even more deals from a larger range of lenders. 

^^Interest rates are based on an owner occupier making principal and interest repayments on a $400,000 loan with an 80% LVR. 

^^^Average variable rate based on owner occupier rates from the big four banks in the Mozo database ($400,000 loan with an 80% LVR).

Compare refinance home loans - last updated 13 August 2022

Search promoted home loans below or do a full Mozo database search . Advertiser disclosure
  • Smart Booster Home Loan

    2 Year Discounted Variable Rate, Owner Occupier, Principal & Interest, <80% LVR

    interest rate
    comparison rate
    Initial monthly repayment
    3.60% p.a.variable for 24 months and then 4.00% p.a. variable
    3.96% p.a.

    Already includes July RBA rate increase. New super low introductory rate home loan for two years. Min 20% deposit. No monthly or ongoing fees. Fast settlement times. Mozo award-winning online lender. Friendly, local Australian based team.

  • Unloan Variable

    Owner Occupier, Refinance Only

    interest rate
    comparison rate
    Initial monthly repayment
    3.14% p.a. variable
    3.06% p.a.

    For refinancers only. 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 in as little as 10 minutes.

  • PAYG Home Loan

    Owner Occupier, Principal & Interest, LVR<80%

    interest rate
    comparison rate
    Initial monthly repayment
    3.29% p.a. variable
    3.33% p.a.

    Low variable rate. Ideal for new home buyers or refinancers. Unlimited additional repayments. Unlimited free redraw. Application completely online. Optional 100% offset can be added for $120 p.a.. 20% deposit required.

  • Celebrate Variable Home Loan

    <60% LVR, Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    3.79% p.a. variable
    3.79% p.a.

    Fast and efficient online application. Automatic discounts as loan is paid down. Free extra repayments and redraw facility. Zero fees. Min 40% deposit required.


* 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, loan amount and term entered. 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.

^See information about the Mozo Experts Choice Home Loan Awards

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