powering smart financial decisions

Switching banks could be a very profitable move

Switching banks could be a very profitable move

Unhappy with your bank? You’re not the only one. So why not switch to a better alternative?

Australia’s 10 biggest banks have an average customer satisfaction rating of 78.5 per cent, according to surveys by Roy Morgan Research:

  • Big four banks = 75.9%
  • Other banks = 83.8%

There are more than 100 lenders in Australia, and competition for business is fierce, so chances are there’s an institution out there offering superior pricing and service to your current provider.

That applies whether you’re talking savings accounts, term deposits, home loans, car loans or credit cards.

Savings accounts

Many Australians have savings accounts with one of the big four banks; they opened an account with the branch up the road when they were at school, and have kept it ever since.

If you’re in that camp, you might be dismayed to learn that there are numerous challenger institutions that offer higher interest rates.

Right now, the big four banks are paying ongoing interest rates of up to 2.40 per cent.

BankProductBase rateMax. rate
ANZProgress Saver0.01%2.40%
NABReward Saver0.50%2.30%
Commonwealth BankGoalSaver0.01%1.65%

However, there are many lenders, both large and small, that are paying more.

Here are just a few examples:

BankProductBase rateMax. rate
Bank of QueenslandFast Track Saver Account0.50%3.00%
UBankUSaver with Ultra1.81%2.87%
ME BankOnline Savings Account1.30%2.85%
Australian UnityActive Saver1.20%2.80%
INGSavings Maximiser1.00%2.80%
Bank FirstPromotional Bonus Saver Account0.05%2.80%

If your bank isn’t doing you right, you may want to consider switching to one that works better for you. 

Term deposits

It’s a similar story with term deposits, whether you’re talking one-year term deposits, three-year term deposits or five-year term deposits.

Lender1 year3 years5 years
G&C Mutual Bank2.70%2.80%3.00%
IMB Bank2.40%2.75%3.00%
Bank First2.70%2.90%3.00%
Police Bank2.60%2.80%2.95%
Commonwealth Bank2.00%1.90%1.90%

If you want to earn the highest interest rates, you need to switch from the big four banks to a rival institution.

Home loans

Savings accounts and term deposits are small beer when compared with home loans, where interest rate differentials can add up to tens of thousands of dollars over the life of a mortgage.

It should be noted that interest rate isn’t everything; you should also weigh up things like fees, loan features and customer service when comparing home loans. However, if we focus just on rates, you might be shocked to discover how much you could save by refinancing from one of the big four banks to another lender.

Let’s assume you’re an owner-occupier who’s looking for a $400,000 mortgage, and that you want to put down a 20 per cent deposit and pay principal and interest. If you went to one of the big four banks, the average standard variable rate would be 4.63 per cent (see breakdown in table below).

However, if you expanded your search, you would be able to find much lower rates – especially if you were willing to consider ‘basic’ home loans (as opposed to full-feature mortgages). For example, Mortgage House recently unveiled a mortgage rate of just 3.29 per cent.

LenderAdvertised rateComparison rateMonthly repayments*Total repayments*
Mortgage House3.29%3.34%$1,750$629,863
Reduce Home Loans3.44%3.44%$1,783$641,811
Freedom Lend3.49%3.49%$1,794$645,821
Commonwealth Bank4.87%5.27%$2,116$761,623

*Fees not included in calculations. Calculations based on a 30-year loan term.

Car loans

Car loans are another area where it’s possible to make significant savings by refinancing from a high-rate loan to a low-rate loan.

Again, interest rate isn’t the be all and end all; it’s important to also consider other factors when comparing car loans. But, all things being equal, a car loan with a lower interest rate is better than a car loan with a higher interest rate.

If you wanted a $30,000 car loan with a five-year term, here’s a comparison of some of the cheapest car loans in Australia with car loans from the big four banks.

LenderAdvertised rateComparison rateMonthly repayments*Total repayments*
Bank First5.29%5.50%$570$34,208
Community First Credit Union5.34%6.10%$571$34,249
Move Bank5.39%5.66%$572$34,291
Commonwealth Bank8.49%9.54%$615$36,921

*Fees not included in calculations.

Credit cards

When it comes to credit cards, all the big banks offer low-rate cards, with interest rates ranging from 9.90 per cent to 13.99 per cent.

That is less than the average interest rate of all the credit cards on the RateCity database, which was 16.80 per cent at the end of April.

However, there are other providers that charge interest rates under 9.00 per cent (see table below). It’s also possible to find credit cards that impose higher interest rates than the big four, but don’t charge an annual fee.

ProviderProductInterest rate (ongoing)Interest-free days (maximum)Annual fee
G&C Mutual BankLow Rate Visa Credit Card7.49%50$50
Community First Credit UnionLow Rate Credit Card8.99%55$40
Easy Street Financial ServicesEasy Low Rate Visa Credit Card8.99%55$40
Northern Inland Credit UnionLow Rate Visa Credit Card8.99%0$0
Commonwealth BankEssentials9.90%55$60
ANZLow Rate12.49%55$58
NABLow Rate Card13.99%55$59

Did you find this helpful? Why not share this news?

Fact Checked -

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



Money Health Newsletter

Subscribe for news, tips and expert opinions to help you make smarter financial decisions

By signing up, you agree to the RateCity Privacy Policy, Terms of Use and Disclaimer.


Learn more about home loans

What happens to my home loan when interest rates rise?

If you are on a variable rate home loan, every so often your rate will be subject to increases and decreases. Rate changes are determined by your lender, not the Reserve Bank of Australia, however often when the RBA changes the cash rate, a number of banks will follow suit, at least to some extent. You can use RateCity cash rate to check how the latest interest rate change affected your mortgage interest rate.

When your rate rises, you will be required to pay your bank more each month in mortgage repayments. Similarly, if your interest rate is cut, then your monthly repayments will decrease. Your lender will notify you of what your new repayments will be, although you can do the calculations yourself, and compare other home loan rates using our mortgage calculator.

There is no way of conclusively predicting when interest rates will go up or down on home loans so if you prefer a more stable approach consider opting for a fixed rate loan.

When do mortgage payments start after settlement?

Generally speaking, your first mortgage payment falls due one month after the settlement date. However, this may vary based on your mortgage terms. You can check the exact date by contacting your lender.

Usually your settlement agent will meet the seller’s representatives to exchange documents at an agreed place and time. The balance purchase price is paid to the seller. The lender will register a mortgage against your title and give you the funds to purchase the new home.

Once the settlement process is complete, the lender allows you to draw down the loan. The loan amount is debited from your loan account. As soon as the settlement paperwork is sorted, you can collect the keys to your new home and work your way through the moving-in checklist.

What is a comparison rate?

The comparison rate is a more inclusive way of comparing home loans that factors in not only on the interest rate but also the majority of upfront and ongoing charges that add to the total cost of a home loan.

The rate is calculated using an industry-wide formula based on a $150,000 loan over a 25-year period and includes things like revert rates after an introductory or fixed rate period, application fees and monthly account keeping fees.

In Australia, all lenders are required by law to publish the comparison rate alongside their advertised rate so people can compare products easily.

What is a variable home loan?

A variable rate home loan is one where the interest rate can and will change over the course of your loan. The rate is determined by your lender, not the Reserve Bank of Australia, so while the cash rate might go down, your bank may decide not to follow suit, although they do broadly follow market conditions. One of the upsides of variable rates is that they are typically more flexible than their fixed rate counterparts which means that a lot of these products will let you make extra repayments and offer features such as offset accounts.

What is a honeymoon rate and honeymoon period?

Also known as the ‘introductory rate’ or ‘bait rate’, a honeymoon rate is a special low interest rate applied to loans for an initial period to attract more borrowers. The honeymoon period when this lower rate applies usually varies from six months to one year. The rate can be fixed, capped or variable for the first 12 months of the loan. At the end of the term, the loan reverts to the standard variable rate.

What is the difference between a fixed rate and variable rate?

A variable rate can fluctuate over the life of a loan as determined by your lender. While the rate is broadly reflective of market conditions, including the Reserve Bank’s cash rate, it is by no means the sole determining factor in your bank’s decision-making process.

A fixed rate is one which is set for a period of time, regardless of market fluctuations. Fixed rates can be as short as one year or as long as 15 years however after this time it will revert to a variable rate, unless you negotiate with your bank to enter into another fixed term agreement

Variable rates is that they are typically more flexible than their fixed rate counterparts which means that a lot of these products will let you make extra repayments and offer features such as offset accounts however fixed rates do offer customers a level of security by knowing exactly how much they need to set aside each month.

Does the Home Loan Rate Promise apply to discounted interest rate offers, such as honeymoon rates?

No. Temporary discounts to home loan interest rates will expire after a limited time, so they aren’t valid for comparing home loans as part of the Home Loan Rate Promise.

However, if your home loan has been discounted from the lender’s standard rate on a permanent basis, you can check if we can find an even lower rate that could apply to you.

What is the best interest rate for a mortgage?

The fastest way to find out what the lowest interest rates on the market are is to use a comparison website.

While a low interest rate is highly preferable, it is not the only factor that will determine whether a particular loan is right for you.

Loans with low interest rates can often include hidden catches, such as high fees or a period of low rates which jumps up after the introductory period has ended.

To work out the best value for money, have a look at a loan’s comparison rate and read the fine print to get across all the fees and charges that you could be theoretically charged over the life of the loan.

What is the difference between fixed, variable and split rates?

Fixed rate

A fixed rate home loan is a loan where the interest rate is set for a certain amount of time, usually between one and 15 years. The advantage of a fixed rate is that you know exactly how much your repayments will be for the duration of the fixed term. There are some disadvantages to fixing that you need to be aware of. Some products won’t let you make extra repayments, or offer tools such as an offset account to help you reduce your interest, while others will charge a significant break fee if you decide to terminate the loan before the fixed period finishes.

Variable rate

A variable rate home loan is one where the interest rate can and will change over the course of your loan. The rate is determined by your lender, not the Reserve Bank of Australia, so while the cash rate might go down, your bank may decide not to follow suit, although they do broadly follow market conditions. One of the upsides of variable rates is that they are typically more flexible than their fixed rate counterparts which means that a lot of these products will let you make extra repayments and offer features such as offset accounts.

Split rates home loans

A split loan lets you fix a portion of your loan, and leave the remainder on a variable rate so you get a bet each way on fixed and variable rates. A split loan is a good option for someone who wants the peace of mind that regular repayments can provide but still wants to retain some of the additional features variable loans typically provide such as an offset account. Of course, with most things in life, split loans are still a trade-off. If the variable rate goes down, for example, the lower interest rates will only apply to the section that you didn’t fix.

What is a standard variable rate (SVR)?

The standard variable rate (SVR) is the interest rate a lender applies to their standard home loan. It is a variable interest rate which is normally used as a benchmark from which they price their other variable rate home loan products.

A standard variable rate home loan typically includes most, if not all the features the lender has on offer, such as an offset account, but it often comes with a higher interest rate attached than their most ‘basic’ product on offer (usually referred to as their basic variable rate mortgage).

What are the different types of home loan interest rates?

A home loan interest rate is used to calculate how much you’ll pay the lender, usually annually, above the amount you borrow. It’s what the lenders charge you for them lending you money and will impact the total amount you’ll pay over the life of your home loan. 

Having understood what are home loan rates in general, here are the two types you usually have with a home loan:

Fixed rates

These interest rates remain constant for a specific period and are a good option if you’re a first-time buyer or if you’re looking for a fixed monthly repayment. One possible downside of a fixed rate is that it may be higher than a variable rate. Also, you don’t benefit from any lowering of interest rates in the market. On the flip side, if rates go up, your rate won’t change, possibly saving you money.

Variable rates

With variable interest rates, the lender can change them at any time. This change can be based on economic conditions or other reasons. Changes in interest rates could be beneficial if your monthly repayment decreases but can be a problem if it increases. Variable interest rates offer several other benefits often not available with fixed rate home loans like redraw and offset facilities and free extra repayments. 

What is the Home Loan Rate Promise?

The Home Loan Rate Promise is RateCity putting its money where its mouth is. We believe that too many Australians are paying too much for their home loans. We’re so confident we can help Aussies save money, if we can’t beat your current rate, we’ll give you a $100 gift card.*

There are two reasons it pays to check your rate with the Home Loan Rate Promise:

  • You can find out how much you could save on your home loan by switching to a loan with a lower interest rate
  • If we can’t beat your current rate, you can claim a $100 gift card with our Home Loan Rate Promise*

What are the features of home loans for expats from Westpac?

If you’re an Australian citizen living and working abroad, you can borrow to buy a property in Australia. With a Westpac non-resident home loan, you can borrow up to 80 per cent of the property value to purchase a property whilst living overseas. The minimum loan amount for these loans is $25,000, with a maximum loan term of 30 years.

The interest rates and other fees for Westpac non-resident home loans are the same as regular home loans offered to borrowers living in Australia. You’ll have to submit proof of income, six-month bank statements, an employment letter, and your last two payslips. You may also be required to submit a copy of your passport and visa that shows you’re allowed to live and work abroad.

Why does Westpac charge an early termination fee for home loans?

The Westpac home loan early termination fee or break cost is applicable if you have a fixed rate home loan and repay part of or the whole outstanding amount before the fixed period ends. If you’re switching between products before the fixed period ends, you’ll pay a switching break cost and an administrative fee. 

The Westpac home loan early termination fee may not apply if you repay an amount below the prepayment threshold. The prepayment threshold is the amount Westpac allows you to repay during the fixed period outside your regular repayments.

Westpac charges this fee because when you take out a home loan, the bank borrows the funds with wholesale rates available to banks and lenders. Westpac will then work out your interest rate based on you making regular repayments for a fixed period. If you repay before this period ends, the lender may incur a loss if there is any change in the wholesale rate of interest.