Banks use hot rates to lure new business, loyal borrowers pay the price

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Banks are flooding the market with home loan products that offer special rates to drum up new business, while loyal customers pay the price. shows there are more than 170 home loan products marketed towards new customers, including offers from three of the Big Four banks (ANZ, Commonwealth Bank and NAB).

Heritage Bank is the latest lender to adjust its home loan rates to offer a discount of up to 0.23 percentage points on rates for new borrowers. ANZ dropped the interest rate on its ‘no frills’ home loan product by 0.34 percentage points for new customers earlier this month.

Sally Tindall, research director at RateCity, said what we are seeing here is a cut to get new business in the door. 

“Banks are hungry for new business and they are offering discounts worth hundreds, even thousands, of dollars per year to lure customers in,” she said. 

“Six out of 10 of the biggest lenders in the country are doing it, so it’s likely that millions of variable customers are being taken for a ride.

“Australians are a loyal bunch. More than three-quarters of us have home loans with a Big Four bank. But when it comes to your home loan, loyalty doesn’t pay. 

“If you are on a variable rate then you are entitled to haggle for that rate.”

For example, a NAB customer with the Base Variable Rate Home Loan (Principal and Interest), who borrowed $400,000 in August 2017, could be paying up to 0.48 percentage points more for the same product compared with a new customer today. In dollar terms, that equates to up to $110 extra per month or $1320 per year. 

What to do to check if your loyalty is being taken for a ride:

* Check the interest rate you are paying;

* Check the rate your bank is offering new customers for the same product;

* Use a comparison site like RateCity to find a list of 3 lenders willing to offer lower rates;

* Call your bank and present them with the evidence. 

RateCity’s lowest ongoing variable home loan rates

Company Product Advertised rate 

Reduce Home Loans

Rate Lovers Variable Home Loan (Amounts < $750k, LVR < 80%)


Easy Street Financial Services

Standard Variable Home Loan (New Money Offer)q


Homestar Finance

Variable Rate Home Loan (Principal and Interest) (Amounts < $750k, LVR < 70%)


Freedom Lend

Freedom Variable Home Loan Special Offer


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