Save $17,000 on your mortgage with one phone call: ACCC

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on December 07, 2020
Save $17,000 on your mortgage with one phone call: ACCC

Photo by Precondo CA on Unsplash

Today the Australian Competition and Consumer Commission (ACCC) said home loan refinancers could save $17,000 in extra interest paid.

ACCC modelling found that borrowers with home loans between three and five years old paid an average of 58 basis points (0.58%) more than the average interest rate on new loans.

According to the Australian Securities and Investments Commission (ASIC), the average interest rate in September was 2.62% p.a.

The ACCC says with a home loan of $250,000, refinancing could save $1,400 in interest in the first year, and over the remaining term, the borrower could save more than $17,000 in interest.

Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Lender

Variable
More details
UNLIMITED REDRAWSSPECIAL OFFER
  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
UNLIMITED REDRAWSSPECIAL OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
Variable
More details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES
  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
Variable
More details
NSW/VIC/SA METRO & INNER REGIONAL AREAS
NSW/VIC/SA METRO & INNER REGIONAL AREAS

Variable Home Loan (Principal and Interest)

  • $5000 Cashback. T&Cs Apply.
Variable
More details
REFINANCE ONLY
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
REFINANCE ONLY

Variable Rate Home Loan – Refinance Only

  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
Variable
More details
NO ONGOING FEESFREE REDRAW FACILITY
  • Rate Match Guarantee. Tic:Toc will match the rate on identical variable P&I home loans. T&C's Apply.
NO ONGOING FEESFREE REDRAW FACILITY

Live-in Variable Loan (Principal and Interest) (LVR < 90%)

  • Rate Match Guarantee. Tic:Toc will match the rate on identical variable P&I home loans. T&C's Apply.

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of June 25, 2022. View disclaimer.

Among a raft of recommendations, the ACCC has recommended lenders be required to 'regularly' prompt borrowers whose loans are older than three years to review their current interest rate. 

“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,” ACCC Chair Rod Sims 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 also said Consumer Data Right will make the refinancing process easier.

“We remain concerned about opaque pricing in the home loan market, but are encouraged that some banks are moving to more transparency without direct intervention from the government,” he said.

“We are recommending ongoing monitoring of this market so we can ensure that this trend of improved pricing transparency continues. We may recommend further action if it does not.”

'Sticky' products and refinancing

The $250,000 yardstick the ACCC has used could be a conservative measure - the average loan written, according to lending indicator figures, in October was more than $566,000. 

External refinancing was down, in original terms, to about $7.7 billion in October - down from highs of nearly $10 billion in May. 

October had an average external refinancing loan size of nearly $474,000.

However, internal refinancing was up in October from September to nearly $4.8 billion, though this is still down from May's highs of nearly $5.3 billion.

October's internal refinancing had an average loan size of nearly $416,000.

After the Reserve Bank's (RBA) cash rate cut to 0.10% in November, many lenders moved to introduce home loans with advertised rates under 2%, yet very few of these were variable.

Instead, many of the latest offers lock-in borrowers for upwards of three years, to packaged home loans that also include credit cards and other products.

The ACCC also proposed a time limit of 10 business days for lenders to complete the discharge authority process. 

Mr Sims said lenders at present have no incentive to make the discharge process "quick or straightforward".

“We want it to be as easy as possible for borrowers to switch lenders, as it should be in all markets. Our recommendations are designed to make this process faster, less confusing and less frustrating," he said.

The RBA has also provided a $200 billion 'term funding facility' (TFF), which enables banks to access low-cost funding at 0.10% per year over three years: the same amount of time many lenders are offering their competitive fixed home loans for.

As of August, CommBank, for example, had accessed $31.4 billion in the TFF. 


Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

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Harrison is Savings.com.au's Assistant Editor. Prior to joining Savings in January 2020, he worked for some of Australia's largest comparison sites and media organisations. With a keen interest in the economy, housing policy, and personal finance, Harrison strives to deliver and edit news and guides that are engaging, thought-provoking, and simple to read.

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