The great Aussie home loan rip-off

2 min read | 13 Sep 2021 

Aussie homeowners have been penalised by the loyalty penalty¹ to the tune of $9 billion in 2021², and new research released today, has put this issue and lack of lender loyalty under the spotlight.

The research study³, commissioned by Athena Home Loans, starkly reveals the scale of the problem and just how unfair Aussie homeowners feel the practice is.

The research shows that 81% of Australian homeowners feel their lender gives a better deal for new customers, whilst an overwhelming majority (91%) want new and existing customers to receive the same rate.

The findings show that over half (58%) of homeowners surveyed are with the big four banks and the vast majority of people (82%) say they feel ripped off by the ‘loyalty penalty’ and angry (74%) with the practice of giving lower rates to new customers only.

Athena CEO and Co-Founder Nathan Walsh says, “Aussie homeowners feel that their lender is taking advantage of them and are fed up. The loyalty penalty costs customers billions of dollars a year. We think it’s time for this practice to stop, and homeowners agree.”

Key findings of the report show:

• 75% believe this practice should be stopped.

• 82% of Australian homeowners saying they feel ‘ripped off’ by their lender and 74% ‘angry’, 72% said they feel ‘outraged’ and 72% are ‘fed-up’.

• Almost all (91%) would like their lender to disclose the rates that they give to new vs existing customer.

• 8 in 10 (82%) said they are penalised for their loyalty and nearly 8 out of 10 (78%) feel like their lender is taking advantage of them.

• If the cost of loyalty was refunded, 97% said they would put it against their loan to pay it down faster.

• More than half (56%) of those surveyed said they feel trapped in their current mortgage deal.

• While 1 in 3 Australians (36%) asked their lender for a drop in their interest rate and were rejected. This number is consistent across Big 4 (35%) and almost 3 in 4 (74%) feel they have to keep checking their rate.

Global CEO of CoreData, Andrew Inwood said the research reveals the high emotion currently being felt by Australians toward home loan pricing by lenders, “This is a topic that customers get very angry about. Australians are crying out for greater transparency from their lenders and expect to be treated fairly.

“The RBA reported the average difference in new and existing customer pricing to be 0.46% for owner occupiers in June 2021. Sadly, for many customers, it is even greater. We know transparency is at the heart of trust. There is enormous opportunity for those lenders with clear pricing and a simple value proposition.

“Those who reward loyalty, have an honest relationship with their customers, and do the right thing when nobody is looking will win and is what consumers need right now,” concluded Inwood. 

Nathan continued, “The RBA reported the average difference in new and existing customer pricing to be 0.46% for owner occupiers in June 2021. Sadly, for many customers, it is even greater.”

On an average loan size of $400k, the difference of 0.46% on a 30-year loan means a customer would pay an additional $37,462 in interest in over the life of the loan, or $1,249 per year.  

The ACCC published a report in December 2020 with several recommendations to stop this unfair practice, but Athena COO and Co-founder Michael Starkey says these seem to be largely ignored.

“The ACCC made important recommendations in the report that have not yet translated to action. We believe it did not go far enough to protect Aussie borrowers. Transparency is key. Lenders should be required to disclose their rates for both new and existing customers, where they price them differently. 92% of home loan borrowers surveyed say they want this reform.”

Nathan Walsh commented, “Aussie homeowners are right to feel outraged and deserve better. This is fundamentally a breach of trust. Famous for being the land of the ‘fair go’, Australian homeowners are seeing the unfairness. They’ve been taken advantage of for too long, and it’s time for change. Rates are at an all-time low at the moment, so it’s at a crucial time when Australians need the money in their pockets, not the banks.”

“Athena is proud to be the first lender to not have loyalty penalties. Our mission will always be to help Aussies pay down their home loan faster, and not penalising them is ensuring they can do this as quickly as possible,” concluded Walsh.

Since Athena launched in February 2019, they have saved their customers $365 million over the life of their loans and aim to double these savings as quickly as possible. In that time, legacy lenders have pocketed $20 billion in loyalty penalties.

• Athena launched in Feb 2019 with a mission to save customers money and help them pay off their home loan faster.

• The average customer switching to Athena from a typical big bank is saving on average $61,000 over the lifetime of their home loan.

• Athena has delivered a cumulative savings of $365 million to their customers, over the life of their loan.

• Automatic Rate Match – Athena is the first home loan provider to promise existing customers that they will never give new customers a better rate on a like-for-like loan.

• AcceleRATES - Another Australian first, whereby customers can drop their own rate. Rates are based on 3 Loan to Value (LVR) tiers. As the customer pays down their loan to hit a new tier, Athena will automatically drop their rate.

• No fees – Athena doesn’t charge fees at all. No ongoing, application, account, or exit fees on our Straight Up and Power Up loans.

For an interview with Nathan Walsh at Athena, call: Anna MacIntosh, Polkadot Communications anna@polkadotcomms.com.au / 0411 527 756

About Athena

Athena is on a mission to save Australians a whole lot of money and help pay off their home loan faster. Athena was founded in June 2017 by Nathan Walsh and Michael Starkey to revolutionise the home loans industry and make it better in every way.

Athena built an innovative digital home loan platform to deliver savings to borrowers, backed by local home loan experts, seven days a week.