Data reveals huge home loan repayment gap between lenders
Data by comparison site Finder has revealed that while 111 lenders have passed on discounts to customers following the RBA's February and May rate cuts, some deals are far better than others.
In fact, there is a difference of more than 4 per cent between the lowest current advertised variable rate in the market and the highest.
For a borrower with a 20 per cent deposit, making principal and interest payments on an owner-occupied property, the lowest variable rate is 5.33 per cent, offered by Suncorp Bank's Back to Basics Home Loan. The highest is 9.89 per cent, with Mortgage House's Chameleon Platinum Home Loan.
A borrower with an average Australian home loan of $640,000 would pay $3566 a month on the lowest rate, or $5565 on the highest. That's a difference of $1999 a month, adding up to $23,983 a year.
For someone with a $1 million mortgage, the difference is $3123 a month and $37,414 a year.
After Suncorp's 5.33 per cent, Pacific Mortgage Group is next with a 5.39 per cent offering, followed by Police Bank and Border Bank with 5.41 per cent.
Interestingly, while it has the highest rate on the market, Mortgage House also has the fifth lowest, with its Chameleon Executive Home Loan (5.48 per cent).
The savings gaps are likely to widen. With the RBA widely tipped to cut again on 8 July, experts believe we will soon see a rise in lenders passing on partial discounts, or no discount at all.
Finder's head of consumer research Graham Cooke said the first two cuts this year were unique in that the majority of lenders passed them both on in full.
'We have not seen this as consistently before,' Cooke said. 'This means banks realise the cost of living pressure is high and there is a lot of social pressure on them to pass the full cut to customers.
'I expect that to continue if we get another cut, though maybe not if we get a fourth or fifth. Then we may see banks hold back.'
Mortgage Choice broker James Algar says he would be 'surprised' if as many institutions passed on a July cut in full, but anticipated customers would hold their lenders to account.
'When interest rates are at the higher end, people tend to be more vigilant about the rates they're actually paying, Algar said. 'Right now, they're definitely engaged.
'We've had a groundswell of people happy to work with smaller lenders because they can get better deals. We're placing more business away from the bigger banks than we used to.'
Algar pointed out that savings are not just about whether a discount is passed on, but also how long it takes a lender to do so.
APRA statistics from May this year showed the residential mortgage portfolio size across the major banks was $1.723 trillion. This means the standard 10-day delay by lenders to pass on a 25 basis point rate cut cost their customers about $118 million in excess interest.
'If you have a 500,000 mortgage and it takes your lender a month to pass on a rate cut, that's $100 extra you have to pay,' Algar said. 'The banks' excuse is always that they have a legacy system and they can't pass on cuts straight away, but they seem to be able to pass on the increases pretty quickly.'
Athena Home Loans were prompt to pass on the last two rate cuts. CEO and founder Nathan Walsh said lenders needed more focus on being fair.
'At a time when the cost of living crisis continues to challenge so many Aussies, acting swiftly to bring some relief to home loaners has to be a priority for all lenders,' Walsh said. 'Savings that result from the RBA lowering the cash rate should be for customers' pockets, not bank profits.
Ten lowest variable rate products on market
Suncorp Bank Back to Basics Home Loan- 5.33%
Pacific Mortgage Group Standard Variable Home Loan- 5.39%
Border Bank First Home Loan- 5.41%
Police Bank First Home Loan- 5.41%
Mortgage House Chameleon Executive Home Loan- 5.48%
Unity Bank Essential Worker Home Loan- 5.49%
G&C Mutual Bank Essential Worker Home Loan- 5.49%
BankWAW Back to Basics- 5.54%
Bank of China Discount Home Loan- 5.63%
Bank Australia Clean Energy Variable Home Loan New Build- 5.77%
Five highest variable rate products
ME Flexible Home Loan- 8.38%
Coastline Bank Introductory Home Loan- 8.51%
Arab Bank Australia Essentials Home Loan- 8.94%
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