THE cost of failing to get the best mortgage interest rate can be a hefty one. New figures show the difference between the cheapest and most expensive home loan is about $400 a month for the average Aussie mortgage of about $300,000, costing $120,000 in extra interest payments over the life of a home loan.
Mortgage experts say a majority of new loans today come with low-rate options, but people who haven’t checked their home loan in years risk paying way too much.
An analysis of 1300 loans by research group Canstar has found that the lowest standard variable rate is 4.49 per cent, almost 2 percentage points cheaper than the most expensive at 6.38 per cent.
Mortgage Choice spokeswoman Jessica Darnbrough says the average standard variable rate among the big four banks is 5.91 per cent, but people who push for a better deal get usually get a lower rate.
The key is to do your homework and ask your lender for the best deal.
‘Lenders are aggressively competing for your business, but if you go direct to a branch they might not feel the need to compete as aggressively,’ Darnbrough says.
Canstar research manager Mitchell Watson says people should not be paying the standard variable rate. If they owe more than $150,000 they should be on a package, and if it’s below that they should look for a basic, low-rate product.
‘If you are paying more than 5.2 per cent, you most likely are paying too much,’ Watson says.
‘Don’t be complacent with what you are paying. Interest rates have been coming down … people could be saving more than they are.’
Fixed-rate mortgages also vary widely, with a difference of 1.8 per cent between cheap and expensive one-year fixed rates. Canstar found that in the week to March 24, 20 fixed-rate loans had cuts, and just one had a rise.
‘There are some lenders who are looking to attract borrowers through their fixed rate offering by dropping their rates well below the rest of the market. Overall fixed rates are at a historical low. However, that is not the case for all fixed-rate loans,’ Watson says.