Loyalty is a virtue in many areas of life, but not necessarily when it comes to your home loan.
Sticking with the same lender indefinitely can sometimes mean you’re paying a hidden cost known as a “loyalty tax.” This typically shows up as higher interest rates compared with the offers available to new customers. With interest rates on the rise, now is a good time to check whether you’re paying more than you need to, and explore your options.
What is Loyalty Tax?
Loyalty tax refers to the extra cost some borrowers pay simply by remaining with the same home loan provider over time.
To attract new customers, lenders often advertise lower interest rates or special offers that aren’t automatically passed on to existing borrowers. As a result, long-standing customers can end up paying a higher rate without even realising it.
In some cases, the longer you remain with one lender, the more a loyalty tax can creep in. That’s why reviewing your home loan from time to time can help ensure you’re still on a competitive rate.
Loyalty tax can also extend beyond interest rates. Some borrowers may miss out on promotions, encounter extra fees, or experience a lower standard of service compared with new customers.
Why It Pays to Review Your Home Loan
Whether it’s your utilities, insurance, or mortgage, comparing providers can uncover potential savings. Small differences in interest rates may seem minor, but they add up over time and can make a meaningful impact on your financial goals.
What to Do if You’re Paying Loyalty Tax
1. Compare rates
Check how your current interest rate stacks up against the rates your lender is offering new customers. A noticeable gap is a signal that action may be needed.
2. Request a lower rate
Many lenders are willing to negotiate for existing customers. If you have a strong credit history or a low loan-to-value ratio, you may be in a good position to secure a discretionary discount.
3. Shop around and refinance
If better options exist elsewhere, refinancing could give you access to lower rates or new customer offers. A thorough comparison can help you make a confident decision, with potential savings clearly outlined along with any costs involved.
Ready to Say Goodbye to Loyalty Tax?
Home loans aren’t a “set and forget” product. Regular reviews can help reduce the risk of paying more than you need to.
The good news is that refinancing is often simpler than buying a property: no contracts of sale, no real estate agents, and generally fewer parties involved.
To get started, the team at Ironbark Group can help you run the numbers.
Or, try our online calculator and see in just 60 seconds how much you could save:
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