Mortgagees with loans at the big four banks are paying up to nearly $300 per month more than customers at the big banks' smaller outfits, new research shows.
As interest rates held firm yesterday at 4.35 per cent and aren't predicted to start falling until later in the year, home owners may have a quicker way to reduce their rates and in turn their repayments, according to the report by Canstar.
"There are big savings, up to 0.75 per cent," Canstar finance expert Steve Mickenbecker said. "It's a big, big difference."
The lowest available interest rates at the big four ranged between 6.49 and 6.84 per cent, while the smaller subsidiaries' rates sat between 5.99 and 6.29 per cent.
What they are offering
The Commonwealth Bank's Unloan was the clear winner of the lowest rate at 5.99 per cent. A CBA customer who changed to Uloan could save $195 a month on a $600,000 loan.
Westpac customers switching to its subsidiary RAMS could save the most, with rates dropping from 6.84 per cent to 6.09 per cent, giving them a saving of $296 per month.
And that was based on the lowest possible rates at the big banks - many people would be on higher rates, Mickenbecker said.
"The potential savings are actually a lot more than that, if you went from an average loan to one of these low ones it could be around $400," he said. "Why would you wait around at this stage in the cycle for six months or something for the Reserve Bank to actually move?"
How to make the move
Mortgage-holders switching from a big bank to a smaller one would need to reapply as a new customer, but that was not as difficult as it once was, Mickenbecker said, with online applications.
"It's a lot easier if you're re-financing - if you're a first-home buyer maybe you do need a broker - but you don't really anymore when you've already done this and you know how it works," he said.
It was important for those considering a change to do their research and understand the different requirements of different loans, he said. It was also worthwhile seeing the rates available at other institutions not affiliated with the big four.
"If you're going to go to the trouble of re-applying as a clean-skin you might want to cast the net wider as well and look at some other lenders because there are a lot of loans below 6 per cent."
There was also no need to move any of your other accounts, with direct debits between different banks making repayments seamless, Mickenbecker said.
Mortgage offset accounts were available with some loans, but they mostly were not necessary, he said.
"Almost every loan in the market has access to redraw - so you can redraw the sum that you're ahead on your loan," he said.
"Make sure you can make extra repayments to the loan so that you can get ahead - that's really critical in the long term - and that the loan gives you the confidence to do that by giving you a redraw or offset.
"If you have any sort of emergency or a wedding or even a holiday - you can get the cash back if you need it."
