Athena denounces ‘loyalty penalty’ costing Australian borrowers billions

Australian homeowners want to see a change to the two-tier system where many lenders prioritize new mortgage customers over old ones through lower interest rates.

A recent survey of 1,000 homeowners commissioned by online lender Athena found that 81% of those surveyed believed their lender was offering better deals to new customers, leaving a significant proportion of mortgage holders feeling ‘ripped off’ and as if they were “penalized” for their loyalty. .

Additionally, 36% of those surveyed said they were turned down by their bank or lender when they asked for a lower rate.

As a result, more than nine in ten homeowners think lenders should disclose the rates they are offering and offer new and existing customers the same rate on their home loan.

“Australian owners are right to feel outraged and deserve better,” said Nathan Walsh, co-founder and CEO of Athena.

“This is fundamentally a breach of trust. Famous for being the land of “fair go”, Australian owners see injustice. We have taken advantage of it for too long and it is time to change. Rates are at their lowest right now, so this is a crucial time when Australians need money in their pockets, not banks. “

The price of loyalty

According to an analysis of Reserve Bank data conducted by Athena, Australian borrowers who have stuck with their current lender will have paid a cumulative ‘loyalty penalty’ of around $ 9 billion so far in 2021.

As Walsh explains, it’s the difference between the interest rates paid by new and existing borrowers from the same lender.

“The RBA reported that the average price difference between new and existing customers was 0.46% for homeowners as of June 2021. Unfortunately, for many customers, it is even larger. “

As large as that $ 9 billion figure is, the impact of this loyalty penalty may be more relevant on an individual level.

On a $ 400,000 loan, Athena says that a rate difference of 0.46% over 30 years would translate into $ 37,462 more interest over the life of the loan, or $ 1,249 more per year.

“Australian homeowners feel their lender is taking advantage and are fed up with it,” Walsh said. “The loyalty penalty costs customers billions of dollars a year. We believe it is time for this practice to end, and the owners agree.

A question of effort against savings

Athena is by no means the only voice calling attention to the cost of loyalty (or lethargy) for home loan clients.

In December of last year, ACCC published a report drawing attention to the fact that a “significant number of borrowers” were getting less competitive interest rates than they could be, possibly costing them thousands of dollars in additional interest.

So why wouldn’t borrowers want to heed these calls and switch to a better rate? As banking expert Mozo Peter Marshall explains, the effort involved can be a deterrent, when some borrowers simply aren’t able to refinance.

“While it’s easier than applying for a new loan, refinancing can still take a lot of effort, including going through an appraisal process,” he says.

“And for some people, refinancing is not possible because their circumstances may have changed, which means they may no longer be approved for a loan. For example, their income may have been reduced since taking out the loan, or they may have incurred other debts.

“At the end of the day, I think it’s a trade-off between the effort and stress involved versus the benefit of getting a lower rate, but there would be a lot of people out there who are definitely worth it. make that effort. “

However, there has been a recent increase in the amount of transferred loans. The ABS recently had a record volume of refinanced mortgages, with $ 17.2 billion in loans converted during the month of July.

RELATED: Athena: The Mortgage Lender Who Trying To Get Rid Of Customers

Fed up with the rate you get from your current lender? Check out some of the great rates available for refinancers in the table below (including those from Athena), or head to our dedicated refinance home loan comparison table to see even more offers.

* CAUTION: This comparison rate only applies to the example (s) given. Different amounts and terms will result in different comparison rates. Costs such as redemption or prepayment charges, and cost savings such as fee waivers, are not included in the comparison rate but can influence the cost of the loan. The comparison rate displayed is that of a guaranteed loan with monthly repayment of principal and interest of $ 150,000 over 25 years.

** The initial monthly repayment figures are only estimates, based on the advertised rate, loan amount and term entered. The rates, fees and charges and therefore the total cost of the loan can vary depending on the amount of your loan, the length of your loan and your credit history. Actual repayments will depend on your personal circumstances and changes in interest rates.

^ See information on the Mozo Experts Choice Home Loan Awards

Mozo provides general product information. We do not consider your personal goals, your financial situation or your needs and we do not recommend any particular product to you. You should make your own decision after reading the PDS or offering literature, or seeking independent advice.

While we pride ourselves on covering a wide range of products, we do not cover all products on the market. If you decide to request a product through our website, you will be dealing directly with the supplier of that product and not with Mozo.

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