Haven't switched home loans recently? The ACCC says you may be losing out on thousands


Fourteen months after being directed by Treasurer Josh Frydenberg to conduct an inquiry into home loan pricing, the Australian Competition and Consumer Commission (ACCC) has released its final report in which it urges Aussie homeowners to review their home loan rates to potentially save thousands of dollars.

Among the findings in the report, the regulator reported on the significant interest rate difference being paid between different cohorts of variable rate borrowers: those who have relatively newer home loans and those who haven’t switched loans in years.

According to the ACCC, this is likely costing borrowers who haven’t recently refinanced their older, less competitive rates ‘many thousands of dollars’ in extra interest.

 “A significant number of Australian home loan borrowers have not switched lenders for several years, yet they stand to save so much money by doing so,” said ACCC Chair, Rod Sims.

“There are factors standing in the way of home loan borrowers switching lenders, such as a lack of clear and transparent pricing, as well as inconvenience and time costs, but for many borrowers switching will be worth the effort.”

Loan lethargy costs borrowers over time

So just how large is this difference between newer and older loan rates?

Drawing from Reserve Bank interest rate figures, the ACCC found that as of September 2020, the average interest rate for a new, owner-occupier home loan (which includes fixed and variable rate home loans) was 2.62% - a figure which has likely dropped further following the November rate cut.

Comparatively that figure is much lower than the average variable rates below which are being paid on older loans (i.e. those which haven’t been refinanced).^

Loan tenureAverage rate
Less than 1 year2.91%
1–3 years3.09%
3–5 years3.20%
5-10 years3.33%
Over 10 years3.66%

While the difference between some of those figures may not seem massive, they can certainly add up over time.

For instance, according to the Mozo home loan repayments calculator, the difference in interest paid on a $250,000 home loan between a variable rate of 3.30% and 3.00% over 20 years would be $9,082.

Lenders encouraged to implement annual prompts

It’s true that some borrowers do regularly switch home loans. According to figures from the Australian Bureau of Statistics, there was actually a considerable spike in refinancing earlier this year with over $15 billion worth of loans refinanced in May alone.

But a recent Mozo analysis found that only 6% of mortgage holders had refinanced their home loans in the 12 months to June 2020, while the ACCC noted that impediments to switching meant that Australians were far less likely to switch home loans compared to other goods and services.

In order to address some of the impediments to switching and to help foster greater competition in the market, the regulator laid out a number of recommendations in its report:

  • Yearly prompts: The ACCC has recommended that lenders be required to give borrowers with variable rate loans that originated three or more years ago an annual prompt in order to encourage them to review their rate and potentially switch to a better deal.
  • Improved discharge process: In its report the ACCC highlighted the discharge process as a potential impediment to borrowers making the switch. To improve the process it has recommended that Discharge Authority forms be standardised between lenders and that a maximum time limit of 10 business days be implemented to ensure that the process is faster.
  • Ongoing competition and price monitoring: The ACCC also recommended that it continues to ‘inquire and monitor’ competition in the market and that it provides ongoing reports to the Treasurer annually over a five year period.

Commenting on the recommendation of annual prompts, Sims said that he hoped the information provided in them would highlight the difference between what an existing customer was getting in the way of a rate compared to a new customer.

“This information would be a powerful motivation for borrowers to seek a lower rate from their current lender or to switch to a new lender. It would also encourage lenders to offer existing customers better rates, promoting greater competition in the sector.”

Sims also stated that the continued rollout of Consumer Data Right (CDR) would help improve the process of comparing and switching home loans, with borrowers able to share their data more easily with alternative lenders and third parties.

RELATED: Borrowers urged to avoid costly fixed home loan revert rate trap

Want to see if you could make the switch to a cheaper loan or even pay off your loan faster? Take our home loans switch and save calculator for a spin, or to get comparing straight away check out the great rates from some of the lenders in the table below.

^ Source: ACCC Home loan price inquiry - Final report

Compare refinance home loans - last updated 1 March 2024

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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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