Home Truths /How to avoid the hidden tax costing Australians billions

How to avoid the hidden tax costing Australians billions 

4 min read | 3 Nov 2022

Loyalty tax blog inline asset
Loyalty tax blog inline asset

It’s good to be loyal, right? 


Usually, loyalty is something that’s rewarded. But when it comes to home loans it feels like the longer you stay with your lender the worse off you are. 

Have you ever noticed that new customers get better rates than you? It’s called the “loyalty tax” and it’s a big deal – it’s costing home loan customers up to $4.5 billion a year. 

So what is “loyalty tax”? 

In a nutshell, it’s the financial penalty you pay for being a loyal customer. That doesn’t sound right, does it? Banks usually reserve their best rates to help snare new customers, while leaving their existing customers to foot the bill on higher rates.

Most home loan customers say they are loyal to their lender but feel penalised for their loyalty, with our research showing the overwhelming majority (98%) feel that they should definitely be rewarded for their loyalty.¹ 

Here's three things you didn’t know about the loyalty tax:  

  1. The big banks are earning about $4.5 billion each year from customer loyalty – or is it apathy – in the form of a ‘Loyalty Tax.²

  2. The gap between the discounts on offer to new customers versus the rates existing mortgage customers pay has widened to a 0.48% gap across the market with variations at the big 4 banks up to 0.91% – that’s nearly a whole percentage point difference!³

  3. 79% of customers don’t feel they have the best deal their lender could offer.¹ 

Why you should care about the loyalty tax  

These percentages may look trifling, but over time they can really scorch a seismic hole in your wallet.   What your loyalty to your lender actually means is that you’re paying more to service your borrowings, and over the term of your loan, it could be costing you big money.  

A 0.91% - or 91 basis points – difference results in a loyal customer paying $70,000 more over the life of a $500,000 loan²….ouch! 💸 

How to buck the post-honeymoon financial blues  

Be wary if you sign up for one of those shiny, seemingly cut-price introductory honeymoon rates. This is usually the first phase in the loyalty tax sting. Look beyond the introductory rate when comparing lenders and, even better, ask them what they charge their existing customers.

Many lenders will offer you a honeymoon rate, cashback or short-lived rewards to hook you, but it’s the life of the loan that you need to think carefully about.  Introductory rates are only good for so long, after which you can be stuck with a rate that creeps up after the dust settles, costing you much more in the long run. 

How to legitimately minimise the loyalty tax   

Unlike other taxes, the awesome news is that the ‘loyalty tax’ is one that you can legitimately avoid without attracting the ire of the tax office. 

As Australia’s first loyalty penalty-free lender, Athena’s Automatic Rate Match is a promise that existing customers on variable rates won’t be charged more than new customers on a like-for-like loan⁴.  

And with Athena AcceleRATES the more you pay down your loan, the more your rate is lowered – automatically. See how much you can save (now AND in the long-term) by switching to Athena. You might be pleasantly surprised.  

We’re proud to be the FIRST Aussie lender to get rid of the loyalty tax. And since existing customers aren’t charged more than newbies, the average Athena customer is saving $61,000 over the life of their loan⁵.  

That’s a car, and a very nice holiday or two (or three). Or, if you choose to, it’s paying off your home loan to hit financial freedom sooner 🙌 

So, what’re you waiting for? Don’t become a mortgage prisoner. Check out how much you could save with an Athena home loan

👂 Psst...

If learning about the loyalty tax might make you feel, well, unloyal….don’t despair.

We’re spreading our ‘no loyalty tax’ ethos and the industry is listening. In fact, Athena’s working on an upcoming partnership with finance heavyweight Mortgage Choice...

Find out how we'll be working together

You’ve got nothing to lose except your home loan!

Start saving a whole lotta time and money

1 Loyalty Tax – Athena Home Loans, Core Data, October 2022 2,customers%20with%20sharper%20loan%20pricing 3 4 Like-for-like loan means the product name (eg. Owner P&I Var) and LVR tier (eg. Liberate, Evaporate, Celebrate) advertised to new customers must be the same product name and the same LVR tier that you have as an existing customer. Applies to variable loans only. The way we construct and name products may include a combination of the loan’s purpose (eg. Owner Occupier, Investor), repayment type (eg. P&I, IO), loan type (eg. Variable), borrower type, different features or specific qualification criteria. None of these criteria will be designed to favour new customers over existing customers. If we ever tempt new customers with a lower rate for our like-for-like loan, anyone who’s on it will get the automatic rate-match. Sweet. It’s an Aussie first! 5 The interest savings estimate is an average of modelled savings of real customers who have refinanced to Athena since launch. The savings are modelled over time estimates only, and are not a prediction. The actual future savings of these customers may be higher or lower. The estimated savings depend on assumptions that may change over the life of the loan, such as future interest rates and future borrower repayment behaviour. In making the average savings estimate, we assume the rates of the existing lender and Athena continue for the life of the loan, and we do not include the fees which may be charged by the existing lender. The remaining term and repayment frequencies are assumed to be the same as the Athena loan, and all repayments are assumed to be made on time with no redraws or credit limit increases. Every borrower’s situation is different. Your actual savings opportunity may differ from this average.
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