Big four loans cost borrowers an extra $9.6bn

BORROWERS who rely on the "big four" banks could save $9.6 billion a year by switching to cheaper rivals.

Households with a $300,000 mortgage, a $25,000 car loan and $2263 on the credit card could save $80 a week if they shopped for the best deal.

Finance comparison website InfoChoice yesterday found the average variable interest rate for home loans among the "big four" banks was nearly 1 per cent higher than their four cheapest rivals.

Consumers could save $3388 a year on a 25-year $300,000 home loan, $94 in interest payments on a $2263 credit card debt, $672 a year on a five-year $25,000 car loan and $48 a year on a savings account by switching from the major banks.

If all of Australia's big bank customers switched to the lowest-priced products in the market, they would save $8.4bn on home loans, $486 million on credit cards and $459m on other financial lending, including car loans.

"Blindly sticking with the big four is costly," InfoChoice banking analyst David Lalich said yesterday. "Consumers all shop around for the best grocery deal and the cheapest petrol prices but the same isn't happening with financial services."

Mr Lalich said home owners were put off switching banks by the exit fees and inconvenience, but could reap thousands of dollars a year in savings. Member-owned building societies and credit unions could offer cheaper rates because they were not under pressure to produce huge profits for shareholders.

InfoChoice found the average variable home loan rate from the Commonwealth, ANZ, NAB and Westpac banks on September 30 was 7.38 per cent, with a $600 application fee and a $93 yearly service fee. The cheapest offers came from Better Option, State Custodians Mortgage Company, Ratebusters and Nationwide Lending, with an average variable rate of 6.41 per cent, no application fee and a $210 yearly service fee.

With interest rates expected to rise again next month, MortgageChoice spokeswoman Kristy Sheppard yesterday advised fixing part or all of the loan.

But Aussie Home Loans chief executive Stephen Porges said fixed rates had already crept up in the past two months. "You can get far better deals if you stick to variable rates," he said.

Resi Home Loans chief executive Lisa Montgomery advised splitting a loan between fixed and variable rates. "You want the flexibility of variable rates, which allow you to make additional payments," she said.

According to the financial comparison website RateCity, three-year fixed rates by the major four banks have increased by as much as 45 basis points to 7.46 per cent since last month.

Comparing rates across 100 lenders, RateCity said its best three-year fixed rate was 6.89 per cent, from the Heritage Building Society.

Sourced from theaustralian.com.au

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