The major banks have household name-status on their side, but it comes at a cost. RateCity estimates sticking with a Big Four bank rather than one of the lowest rate lenders could have seen a borrower with a $350,000 mortgage fork out around $16k in the past 10 years*. For the many homeowners with bigger mortgages – around the $500,000 mark – that figure is closer to $23,000.
Collectively, we estimate Aussies wasted around $50 billion. That’s $50,000,000,000. No wonder the majors are clocking up multi-billion dollar profits every year. We believe the most savvy borrowers could have saved even more. Borrowers who have switched to smaller, more competitive lenders are saving hundreds of dollars every month. With rates well under 4 per cent now, there’s no better time to switch.
(*) How we came up with our estimate
First, we’ve looked at the major banks’ (ANZ, Commonwealth Bank, NAB and Westpac) discounted variable loan rates over the past 10 years, which is published by the Reserve Bank of Australia (RBA). They also publish the ‘mortgage managers basic variable’ rates. We’ve compared these rates to lowest rates on the market now and 10 years ago, and used it to make a conservative estimate of what the lowest rates on the market have been.
Then we took a typical home loan over the past decade. We’ve used $350,000. The average loan size from 10 years ago was more like $250,000, however the typical mortgage holder has upgraded their property since then, so the loan size will be bigger on average. We calculated the repayments on this $350,000 loan for the majors’ rate compared to our estimated lowest rate, and added up the difference. The totals surprised even us.
When choosing a lender it’s important to look at a range of factors, but make sure you’re not paying over the odds. If you haven’t looked at you rate in the past year, chances are you’re paying too much. Compare rates now and start saving.
Assumptions: Lowest rates on the market have been estimated based on a range of sources, including RBA and RateCity historical data. The $50bn figure is based on total loan book for each month, multiplied by the applicable interest rate for that month, divided by 12. Fees are excluded, as are other features and benefits. Loan terms are 30 years and assume no additional repayments have been made. Not a guarantee or projection of future savings.