By Brad Makivoy | February 23, 2018
Are you aware that Australian banks have increased interest rates at the fastest rate in more than 7 years? Even with the Reserve Bank leaving the cash rate unchanged in 16 months?
Interest charges on mortgages for employed Aussies have now risen by 4.5% since December, more than double the official rate of inflation.
The news comes from recently released Australian Bureau of Statistics cost of living data.
The finding means that you could be one of the many that are paying a whopping 0.5% more on your home loan than you should be. A gap which can work out to a whopping $40,000 difference over the life of the average 30 year $400,000 loan.
The productivity commission has gone as far as to accuse the banks of exploiting their loyal customers because of the inflated rates given to existing customers, while new customers are still being offered competitive rates.
So why are the banks doing this?
Unfortunately, the answer is pretty simple.
Banks expect that you will stick with them, even if there are better deals out there.
They know that you’re time poor and have better things to do than running around comparing home loan rates and reading the fine print. For most people, it’s simply easier to stay put.
So why would they fight to keep you happy, if you’re going to stay put?
For example, why offer someone 3.50%, if they’ll stick with you at 4%, right?
All they’d be doing is costing themselves hundreds of millions of dollars with little to no return.
However, for banks to grow their loan book they need new customers. The best way to attract new customers is with attractive low rates.
This is why time and time again, the low rates go to new customers and existing customers miss out and get left with subtle rate rises and inflated interest rates.
And those who don’t shop around are at the biggest risk of paying too much.
If you’ve been on the same home loan product for over 12 months, now’s the time to shop around!
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