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Is there such a thing as loyalty discount home loans?

Mark Bristow avatar
Mark Bristow
- 3 min read
Is there such a thing as loyalty discount home loans?

Are you a loyal home loan customer? If so, you could be rewarded with lower interest rates, provided your mortgage is with a lender that offers loyalty discounts.

In many cases, being a loyal mortgage customer isn’t especially rewarding. In fact, you may find that your lender offers discounted interest rates to attract new customers, while you’re still paying interest the same higher rate. Many borrowers choose to refinance their home loans with other lenders rather than keep paying this so-called “loyalty tax.

However, a small number of home loan providers offer loyalty discounts as an incentive for borrowers to stay, rather than switch to another lender. These can include rate discounts to borrowers that have held the loan for a certain period of time – for example, you could be offered a -0.15 per cent interest rate discount after staying with your lender for five years, which would apply for the rest of your home loan’s term, even if the variable rate rises or falls.

An alternative way that some lenders reward customer loyalty is by offering existing customers the same interest rates as new customers, even automatically discounting rates to match new changes.

If your lender doesn’t offer a loyalty program, you may be able to arrange your own interest rate discount simply by calling your lender and asking to be put onto the same interest rate as their new customers. You may be surprised what the lender may be willing to offer in order to keep your business, rather than seeing your switch to another mortgage provider.  

Loyalty discount mortgages can seem enticing. But it’s important to compare home loans using the comparison rate, which combines the average rate over the life of the loan with the lender’s ongoing fees. By doing so, you can get a better idea of the real cost of the home loan and more easily compare it with others on the market.

You may find that by selecting a mortgage that has a low interest rate from the start of the loan, you could save more money in the long run than with a loyalty discount home loan. You can make your own calculations with RateCity’s home loan comparison tool and home loan repayment calculator, and work out which home loans may save you the most money over time. You can also contact a mortgage broker for more advice on whether a loyalty discount home loan may be the best match for your personal financial situation.

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Product database updated 29 Mar, 2024

This article was reviewed by Personal Finance Editor Alex Ritchie before it was published as part of RateCity's Fact Check process.