Australians with older home loans pay significantly higher interest rates than borrowers with newer home loans according to a new report from the Australian Competition and Consumer Commission (ACCC).
Chair of the ACCC, Rod Sims said the report, Home loan price inquiry, highlighted that many borrowers could save money by seeking a lower rate from their existing lender or switching to a new lender.
“To encourage this process, the ACCC has recommended that lenders be required to regularly prompt borrowers whose loans are older than three years to review their current interest rate and to consider the potential benefits of switching products or lenders,” Mr Sims said.
“A significant number of Australian home loan borrowers have not switched lenders for several years, yet they stand to save so much money by doing so,” he said.
“There are factors standing in the way of home loan borrowers switching lenders, such as a lack of clear and transparent pricing, as well as inconvenience and time costs, but for many borrowers switching will be worth the effort.”
Mr Sims said the ACCC’s recommended ‘prompt’ would clearly set out for many borrowers how much higher their interest rate was compared to new borrowers.
He said that as of September this year borrowers with home loans between three and five years old paid on average about 58 basis points more than the average interest rate paid for new loans.
“Such a borrower with a home loan of $250,000 could save more than $1,400 in interest in the first year by switching to a loan with the lower, average interest rate paid for new loans,” he said.
“Over the remaining term of the loan, that borrower could save more than $17,000 in interest.”
Mr Sims said the ACCC also recommended lenders be required to provide a standardised Discharge Authority form to borrowers; a time limit of 10 business days should be imposed on lenders to complete the discharge authority process; as well as continued monitoring of home loan prices and competition in the home loan market.
The ACCC’s 79-page report can be accessed at this PS News link.
