Existing home loan borrowers in the Central West can save tens of thousands of dollars over the life of their mortgage, according to the Australian Competition and Consumer Commission.
The ACCC, in its Residential Mortgage Price Inquiry, found new borrowers, on average, pay lower interest rates than existing borrowers.
“Existing borrowers who do not actively shop around for a better deal on a regular basis are the main losers from opaque discretionary pricing [of banks],” the ACCC noted.
“An existing borrower with an average-sized residential mortgage who negotiated to pay the same interest rate as the average new borrower from June 30, 2018 could initially save up to $850 a year in interest.
“For existing borrowers with a larger than average residential mortgage, the savings from a 32 basis point reduction in the interest rate they pay could add up to tens of thousands of dollars over the full term of their residential mortgage in net present value terms.”
An average-sized residential mortgage ranged from $257,065 to $413,834 depending on the loan category as of June 30, 2018.
Paul Jarratt, a mortgage broker with Smartline in the Central West, said borrowers need to be clever.
"Borrowers will suffer if they are not smart,” Mr Jarratt said.
“There has to be a level of personal responsibility here as everything isn't always someone else's fault.
“Borrowers who use a broker will normally have an annual loan review done by the broker and will continue to have competitive loan pricing or they move to a lender with a better deal.”
Mr Jarratt said borrowers should not expect banks to offer a cheaper rate unless they are asked.
“Why would they? Asking for a better rate is what a broker does for you every year," he said.
The ACCC said banks’ opaque discretionary pricing is deterring customers from shopping around for a better deal.
“As a result there are many existing borrowers who remain with a lender that does not offer them the best deal.
“The lender earns higher profits as a result of the loyalty of those borrowers.”
The ACCC said borrowers can benefit by asking their current lender for a better interest rate and lower fees on their residential mortgage, switching their residential mortgage to a cheaper product with the same lender or switching lenders.