Existing borrowers get bigger RBA rate hikes than new customers

New analysis shows dozens of lenders have passed on bigger RBA rate hikes to their existing customers than what’s on offer to new ones.

With another RBA hike coming tomorrow, the gap between new and existing customer rates is set to blow out even further.

RateCity.com.au analysis shows since the RBA hikes began in May, 33 lenders have passed on full hikes to their variable rates, only to turn around and cut their lowest offers for new customers.

Big four bank cuts to their lowest variable rates since May:

• CBA two cuts totalling 0.25%
• Westpac one cut of 0.35%
• NAB one cut of 0.20%
• ANZ two cuts totalling 0.25%

As a result, a borrower who took out one of the big four banks’ lowest variable rates just six months ago is now on a rate that is, on average, 0.26 percentage points higher than what their bank is offering new customers today. This calculation includes Westpac’s current introductory rate.

This gap widens to 0.67 percentage points for the average big four customer who took out their home loan two years ago and hasn’t negotiated.

On a $500,000, 25-year loan today, this difference in rate translates to $190 extra in monthly repayments.

Estimated existing customer vs new customer variable rates – last 2 years

Assumes customer took out lowest variable rate loan 1 Oct 2020 and has not negotiated

Source: RateCity.com.au. Rates are for owner-occupiers paying principal and interest. Existing customer rate assumes borrower took out a loan on 1 October 2020 and has not negotiated any rate reductions. LVR restrictions apply for lowest rates.

RateCity.com.au research director, Sally Tindall, said: “While loyal bank customers are forced to take the RBA rate hikes on the chin, new customers are being offered better deals.”

“It’s crazy to think that a customer who took out a loan just six months ago is already being charged significantly more than a new customer today,” she said.

“New customer discounts have picked up steam since the RBA cash rate hikes started. Refinancing is booming as people seek out lower rates and that’s forced the banks to put better rates on the table.

“The catch is, they’re only offering these rates to people willing to jump ship.

“With more RBA hikes coming, the gap between new and existing customer rates is set to blow out even further as banks try to compete during this refinancing boom.

“For many borrowers it’s not practical or cost-effective to switch lenders every few months, however, people should at least haggle with their bank every time it offers a better deal to new customers.

“If you haven’t negotiated with your bank recently, pick up the phone and be that annoying customer. Your bank might turn you down, but they also might just say yes,” she said.

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