UNSUSPECTING home loan customers are getting fleeced by their own banks by paying exorbitant variable interest rates that are more than four times the cash rate.
Banking sources have revealed to News Corp Australia that customers are paying up to 7.3 per cent on variable rate deals — well above the lowest deals on the market at 3.39 per cent.
Analysis by financial services firm Canstar has revealed on a $300,000 30-year home loan customers paying an interest rate of 7.3 per cent would pay $440,416 in interest costs.
But they could save $262,055 in interest costs if they paid the lowest variable rate available on the market at 3.39 per cent.
The Reserve Bank of Australia board kept the cash rate on hold at 1.5 per cent this month but lenders have conceded there are many customers who simply are paying way more than they should.
Mortgage Choice chief executive officer John Flavell warned customers who hadn’t reviewed their home loan within the last two years that “you could be paying too much.”
Mortgage Choice chief executive John Flavell said it was critical home loan customers regularly reviewed their home loans.
“Your home loan is not something you should take a set and forget attitude towards,’’ he said.
“It is the biggest financial commitment you will ever make so it is critical that you stay on top of it.”
He urged borrowers to look at their rate and if it is above four per cent to “review your options.”
Earlier this month National Australia Bank and Westpac both made out-of-cycle variable rate hikes but lenders the Commonwealth Bank and ANZ are yet to move.
National Australia Bank increased its variable interest rates out-of-cycle last week.
Lender ME’s head of home loans Patrick Nolan warned borrowers who stick with the big four lenders that it could be costing them more.
“Millions of borrowers are likely to be paying too much on their mortgage given 80 per cent are with one of the major banks and probably haven’t refinanced in years,’’ he said.
Banks have blamed recent out-of-cycle rate rises on increased funding costs and pressure to slowdown investor lending.
Canstar spokeswoman Belinda Williamson said it was “ludicrous” borrowers were paying rates within the seven per cent range.
“If you’re guilty of having a high interest rate or not knowing what your rate is or how it stacks up against rates today you could be ripping yourself off from getting a better deal.”
Published on Daily Telegraph by Sophie Elsworth