Mortgage holders hit with ‘loyalty tax’, new customers dodge rate rises

By Jack Dona · · 2 min read
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A real estate agent drops a set of house keys into a buyer's hand

While customer loyalty is often rewarded, recent trends in home loan rates suggest existing mortgage holders are being passed the buck, while lenders entice new customers with lower rates.  

Data from Lendi reveals that existing home loan customers are being charged rates that are  86 basis points higher on average than the rates newer customers are being offered. 

The difference in interest is even higher for the big four banks – an average 91 basis points.

It’s been dubbed a ‘loyalty tax’ and it could end up costing customers tens of thousands of dollars extra over the life of the loan. 

For example, on a $500,000 home loan, an extra 91bp on your interest rate equates to $70,000 in extra interest being charged.

According to Lendi, this ‘loyalty tax’ is mainly affecting those who have held their home loan with the same lender for a few years. 

Expected cash rate increases may further this rate-divide 

With the official cash rate expected to continue rising, the disparity between existing and new customers may grow larger.

This is cause for concern for home loan customers who are already facing increased financial pressure. 

But, how do customers know if they’re being charged a higher interest rate? And is there anything they can do to get a better deal? 

First off, customers can compare the interest rate they are being charged with the rate their current lender is offering new customers. If there’s a significant difference, then they’re likely being hit with a loyalty tax. 

Next, a customer can compare home loan rates right now to see how their current rate stacks up with what is being offered. 

What customers can do is create a platform for negotiation with their lender. By working out what they’re being charged, what new customers are being offered, and what the going rates are in the market, they might have steadier ground to stand on when haggling for a better rate. 

To get you started, here’s some of the latest home loan rates available.

Compare home loans - last updated 9 December 2023

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