Eight million home owners are currently being stung with a “loyalty tax” which is the tax you pay for your loyalty to your bank or lender.
So if you haven’t reviewed your home loan recently, especially given the current environment and interest rates at record lows, now is the perfect time. You could be entitled to some significant savings.
What is "loyalty tax"?
Loyalty tax happens when new customers are offered lower interest rates while existing long-term clients are still paying a higher interest rate.
How do you know if you’re being charged a “loyalty tax”?
Speak to 8 Collective’s finance team. We do all the hard work for you by looking at your current situation and comparing it to all the lenders on our panel to ensure you’re getting the best deal possible. If you haven’t reviewed your home loan in a few years, it’s safe to assume you’re probably paying a loyalty tax to your bank.
How much is "loyalty tax" costing you?
According to the Finder 2020 Loyalty Tax Report, it’s estimated that the average homeowner could save $6,826 per year if they switched from the average variable home loan rate of 4.55% to the lowest rate on the market.
An ACCC inquiry into bank interest rates has also found that long term home loan customers with the big four banks are paying an average of 0.26 of a percentage point higher than new customers. The “loyalty tax” paid by borrowers is even greater for loans more than five years old, with average interest rates 0.4 of a percentage point higher than those offered to new customers. “For a loan balance of $250,000, this difference implies an extra $1,000 in interest payments per year,” the RBA noted.
That means many Australian’s could be paying thousands of unnecessary dollars each year, just by sticking with their current lender.
Lenders increasing their rates periodically or not passing on the full RBA rate cuts to existing customers has also attributed to how much loyalty tax is charged.
Should you refinance?
To find out if you’re currently getting the best deal, give us a call today.