Commonwealth Bank and ANZ Bank have raised mortgage interest rates. Westpac did the same last week.
But if you still have a loan with the big four, we can only assume you enjoy lighting your cigar with $50 notes. Because you’re getting a truly terrible deal.
ANZ said it was making the 0.16 percentage point increase in response to higher wholesale funding costs. CBA variable mortgage rates will rise by 0.15 percentage points – same reason and about half an hour after ANZ.
CBA’s change comes into effect on October 4 and ANZ’s on September 27.
RateCity was quoted as saying ANZ’s move would raise monthly repayments on a $500,000 mortgage by $50 to $2795. CBA’s rate rise would raise repayments on a loan of this size by $47 a month to $2798.
But our question remains: why would anyone pay the big four rates?
As someone pointed out last week when Westpac pushed up its rates, there are literally dozens of banks offering morgages below 4 per cent, or nearly 200 basis points below Westpac.
“People get angry but for some reason they remain obstinately loyal to the big four,” says Macquarie University associate professor for finance Elizabeth Sheedy.
Now it is true that switching isn’t as easy as it once was. Largely because of the new regulations supposedly protecting the system from liar loans.
Finder.com.au, for instance, found more than 50,000 have had their applications for alternative loans turned down – 40 per cent of those heeding the advice to switch.
That said, there is no excuse for staying with the big four.
Here’s just a snatch of what’s on offer at Finder.com.au:
Image: Finder.com.au
Is switching hard? Nope.
Find a cheap loan, apply for approval in the normal way (life has become harder since the Banking Royal Commission so you will have to produce evidence of income and expenses).
Once approved, your new lender will talk to your old lender and handle the actual switching.
How much could you save?
According to Finder – heaps!
“Let’s say you’ve borrowed $400,100 (that’s the Australian average, but you may have borrowed a lot more). Now say your interest rate has crept up to 4.30% (don’t laugh, check your bank statement!).
“If you’ve taken out a standard, 30-year mortgage with principal and interest repayments at that rate, you’d be paying $1,979.98 a month in repayments. By the end of the loan that’s $712,793.03.
“But what if you switched to a competitive mortgage with a 3.59% interest rate? You’d be paying $1,816.79 a month. That’s $654,043.88 for the life of the loan.
“That’s a saving of $58,749 dollars (and 15 cents)”.
Enough said.