Existing bank customers are starting to be rewarded for their loyalty.
EXISTING bank customers are starting to be rewarded for their loyalty with home loan rate discounts that could save borrowers more than $1,000 in the first year alone, according to new insights from financial comparison site, Canstar.
Canstar’s analysis of Reserve Bank lenders’ Interest Rate data showed the gap between the interest rates being paid by existing customers and new customers was narrowing.
Canstar’s analysis of Reserve Bank lenders’ Interest Rate data showed the gap between the interest rates being paid by existing customers and new customers was narrowing.
In April 2022, before the beginning of the rate rise cycle, existing borrowers were paying an average variable rate of 2.86 per cent while new customers were paying 2.41 per cent – a gap of 0.45 per cent
By December 2022, the gap had widened to 0.51 per cent with existing borrowers paying an average variable rate of 5.49 per cent while new customers were paying only 4.98 per cent.
Fast forward and the latest data for May, 2023 showed the gap was 0.37 per cent, with existing borrowers paying an average rate of 6.03 per cent while new customers were paying 5.66 per cent.
Canstar’s editor-at-large Effie Zahos. Picture: Tim Hunter.
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Canstar’s editor-at-large Effie Zahos said the gap in interest rates being offered to new and existing borrowers looked to be closing as lenders shift gears.
“The latest Lending Indicators from the Australian Bureau of Statistics shows in June there was a 18 per cent fall year-on-year in the value of new housing loan commitments and more than $20 billion in loans were refinanced to a new lender,” she said.
“With fewer new borrowers entering the market and a remarkable volume of loans being refinanced, lenders are being forced to put more effort into retaining their existing customers.
“The good news for borrowers is existing customers may be able to negotiate discounted rates to rival some of the deals offered to new customers.
Existing customers may be able to negotiate discounted rates to rival some of the deals offered to new customers.
She said it looked as though the higher price borrowers paid for being loyal to their lender was narrowing.
“Canstar’s research shows even a rate discount of 0.25 percentage points on a $500,000 loan over 30 years could lower repayments from $3,320 per month down to $3,236 – a saving of $84 per month or $1,008 in the first year,” she said.
“That could be the cost of your annual car or home insurance so it’s worth chasing.”
Insights from Canstar’s mortgage broking partner, Connect2Broker, revealed if you’ve been a loyal customer and are in a good position to refinance to a new lender then your own bank might be willing to negotiate with you to keep your business.
Many customers are tired of being taken for granted and insist on being refinanced.
Connect2Broker Managing Director, Ray Hair said their brokers were reporting that borrowers who had been loyal to their lender, had solid equity in their loan and were showing a real motivation to refinance had been securing rate discounts.
“The appetite to retain good customers is the driving force for lenders and they are being selective about the customers they want to keep,” Mr Hair said.
“Some borrowers have even been offered cash incentives by their current lender to stay put.
“Acting in the best interests of the customer, brokers should always seek to obtain a better rate from the customer’s existing lender before seeking to refinance the customer elsewhere. “Many customers are, however, tired of being taken for granted and insist on being refinanced.”
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