HOME loan customers are being gouged by excessive interest rates and in some cases are paying close to ten per cent.
New findings show by financial comparison website Finder.com.au show there are dozens of mortgages on the market charging customers interest rates of between seven per cent and a staggering 9.85 per cent.
They usually include home loans for customers who have a bad credit rating or have signed up to low-doc or equity release loans.
But many customers on full-doc loans are still paying hefty interest rates in the high fives’ and six per cent range.
Experts have warned the nation’s millions of mortgage customers that if they don’t have a home loan rate with a ‘four in front’ they are paying way too much.
Mortgage and Finance Association of Australia chair Tim Brown urged mortgage customers on these high rate loans to shop around for a better deal.
‘In this market if you are not paying a rate with a four in front for a residential loan you are paying way too much,” he said.
‘The rate market is probably the best it will ever be, I didn’t think it would go this low and there’s talk of another interest rate cut coming.
‘All the customer has to do is go to a qualified mortgage broker or a lender and ask the question (to get a better deal), it doesn’t cost you any money to have that conversation.”
The Finder.com.au research found the average standard variable home loan rate is about 5.5 per cent but is expected to drop to 5.25 per cent once all the institutions pass on the latest 25 basis cut.
Monthly repayments on a $300,000 30-year loan charging the lowest variable rate on the market of 4.23 per cent – being offered by loans.com.au – is $1472.
Monthly repayments on the same loan with the highest variable rate at 9.85 per cent – being offered by Heritage Isle Credit Union – is $2600.
But Mr Brown said the customers on these high-rate loans only accounted for a ‘very small percentage of the market.’
Finder.com.au spokeswoman Michelle Hutchison said if customers had previously signed up to these high-rate loans to revisit their mortgage and see if they can get better bang for their buck.
‘If you signed up to one of these loans seven or more years ago and have improved your credit file since then, it’s worth looking into refinancing and switching to a cheaper deal,” she said.
‘These types of home loans generally apply to borrowers with adverse credit files or those who are deemed as higher risk borrowers such as older people and self-employed with low documentation.
‘They also generally apply to those who want to borrow more money, access equity, bridging loans, reverse mortgages or a second mortgage.’
Australian Bankers’ Association’s chief executive officer Steven Munchenberg said if customers did not think they were getting the best deal around they should talk to the lender.
‘Eighty-four per cent of home loan products offered are priced under 5.5 per cent,” he said.
The Australian Securities Exchange’s RBA RateTracker was this week predicting there was about a 50-50 chance of another rate fall in March.