Athena denounces ‘loyalty penalty’ costing Australian borrowers billions

Australian homeowners want to see a change to the two-tier system where many lenders prioritize new mortgage customers over old ones through lower interest rates.
A recent survey of 1,000 homeowners commissioned by online lender Athena found that 81% of those surveyed believed their lender was offering better deals to new customers, leaving a significant proportion of mortgage holders feeling ‘ripped off’ and as if they were âpenalizedâ for their loyalty. .
Additionally, 36% of those surveyed said they were turned down by their bank or lender when they asked for a lower rate.
As a result, more than nine in ten homeowners think lenders should disclose the rates they are offering and offer new and existing customers the same rate on their home loan.
âAustralian owners are right to feel outraged and deserve better,â said Nathan Walsh, co-founder and CEO of Athena.
âThis is fundamentally a breach of trust. Famous for being the land of “fair go”, Australian owners see injustice. We have taken advantage of it for too long and it is time to change. Rates are at their lowest right now, so this is a crucial time when Australians need money in their pockets, not banks. “
The price of loyalty
According to an analysis of Reserve Bank data conducted by Athena, Australian borrowers who have stuck with their current lender will have paid a cumulative ‘loyalty penalty’ of around $ 9 billion so far in 2021.
As Walsh explains, it’s the difference between the interest rates paid by new and existing borrowers from the same lender.
âThe RBA reported that the average price difference between new and existing customers was 0.46% for homeowners as of June 2021. Unfortunately, for many customers, it is even larger. “
As large as that $ 9 billion figure is, the impact of this loyalty penalty may be more relevant on an individual level.
On a $ 400,000 loan, Athena says that a rate difference of 0.46% over 30 years would translate into $ 37,462 more interest over the life of the loan, or $ 1,249 more per year.
âAustralian homeowners feel their lender is taking advantage and are fed up with it,â Walsh said. âThe loyalty penalty costs customers billions of dollars a year. We believe it is time for this practice to end, and the owners agree.
A question of effort against savings
Athena is by no means the only voice calling attention to the cost of loyalty (or lethargy) for home loan clients.
In December of last year, ACCC published a report drawing attention to the fact that a “significant number of borrowers” were getting less competitive interest rates than they could be, possibly costing them thousands of dollars in additional interest.
So why wouldn’t borrowers want to heed these calls and switch to a better rate? As banking expert Mozo Peter Marshall explains, the effort involved can be a deterrent, when some borrowers simply aren’t able to refinance.
âWhile it’s easier than applying for a new loan, refinancing can still take a lot of effort, including going through an appraisal process,â he says.
âAnd for some people, refinancing is not possible because their circumstances may have changed, which means they may no longer be approved for a loan. For example, their income may have been reduced since taking out the loan, or they may have incurred other debts.
âAt the end of the day, I think it’s a trade-off between the effort and stress involved versus the benefit of getting a lower rate, but there would be a lot of people out there who are definitely worth it. make that effort. “
However, there has been a recent increase in the amount of transferred loans. The ABS recently had a record volume of refinanced mortgages, with $ 17.2 billion in loans converted during the month of July.
RELATED: Athena: The Mortgage Lender Who Trying To Get Rid Of Customers
Fed up with the rate you get from your current lender? Check out some of the great rates available for refinancers in the table below (including those from Athena), or head to our dedicated refinance home loan comparison table to see even more offers.
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