The big banks are earning about $4.5 billion each year from a customer “loyalty tax”, which is increasing amid Reserve Bank of Australia interest rate rises as lenders pass higher borrowing costs through to existing customers while seeking to attract new ones with lower rates.shows the huge savings that can be made from switching home loans as the big banks profit on borrower apathy by charging significantly higher mortgage rates to customers already on their books.
At a big bank, the 91 basis point difference would result in the loyal customer paying $70,000 more over the life of a $500,000 loan. Across the sector, the additional earnings from the difference are estimated to total more than $4.5 billion a year.“There is so much competition on the front book. But banks are passing rate rises all through onto on the back book,” Lendi chief executive David Hyman said.
“Most banks have LVR [loan to value]-weighted pricing, but it is only available on the front book when a loan is taken out at a point-in-time. As LVRs are falling, rates on the back book get no discount,” Mr Hyman said.“This is another compelling reason to shop around, regardless of fixed rates coming off.”
Lendi compiled the data using rates provided by customers using its platform, who advise it on current lender rates when they create a new account. Lendi compared this to the actual settled rate of customers at those same banks.