Loyalty is an honourable trait, but not necessarily when it comes to your home loan.
Sticking with the same lender indefinitely may mean you’re paying what’s known as a ‘loyalty tax’. This often shows up as higher interest rates compared to what new customers are offered.
With interest rates on the rise, now could be a good time to check whether you are paying loyalty tax and it may be worthwhile exploring your options along the way.
What is loyalty tax?
Loyalty tax refers to the extra cost some borrowers pay simply by staying 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-term customers can end up paying a higher rate without 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.
Interest rates aren’t the only area where loyalty tax can apply. In some cases, long-standing customers may miss out on special offers, encounter additional fees, or receive a lower standard of customer service than new customers.
Why it pays to review your home loan
Whether it’s your utilities or your mortgage, comparing providers can help you identify areas to save. While the amounts may seem small at first, they can accumulate over time and contribute to broader financial goals.
What to do if you’re paying loyalty tax
Compare rates
Start by checking how your current interest rate compares with the rates your lender is advertising to new customers. If there’s a noticeable difference, it may be time to take action.
Request a lower rate
You may also consider negotiating directly with your lender to see if a more competitive rate is available. In some cases, lenders may apply a discretionary discount to retain existing customers.
Having a strong credit history and a lower loan-to-value ratio can help strengthen your negotiating position.
Shop around and refinance
If you’d like to see what else is out there, we can compare home loans across the market for you. If we find a more suitable or competitive option, refinancing could be worth a look and it may even give you access to new customer offers.
We’ll break down the potential savings and explain any costs involved, so you can decide with confidence.
Ready to say goodbye to loyalty tax?
When it comes to home loans, it doesn’t pay to set and forget. Regularly reviewing your mortgage and comparing options can help reduce the risk of paying a loyalty tax.
The good news is that refinancing is generally more straightforward than buying a property. There’s no contract of sale, no real estate agents, and often far fewer parties involved – just us and, in many cases, your lender.
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