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%%How much can you save by refinancing?%%

Last week, the ACCC released its [Home Loan Price Inquiry interim report](https://www.accc.gov.au/focus-areas/inquiries-ongoing/home-loan-price-inquiry/interim-report) which showed, on average, banks charge existing home loan customers 0.26% more than new customers. 

At Lendi, we’ve been campaigning about this loyalty tax for some time. Our customer data shows the [discrepancy between what banks charge new and old](https://www.lendi.com.au/inspire/insights/aussies-being-charged-banks-loyalty-tax-central-bank-confirms/) home loan customers can be close to 1% and it’s our job to make sure property owners get the best deal possible on their mortgages - so the loyalty tax is an issue we try to shine a light on. 

## What did the ACCC interim report find?

- Customers with new owner-occupier loans with principal and interest repayments were paying, on average, 26 basis points less than customers with existing loans. 
- The difference was usually even more significant for customers with older loans. In most cases, the average difference is even more significant for customers with older loans. 
- For example, as at 30 September 2019, the big four banks’ customers whose existing owner-occupier loans with principal and interest repayments which were greater than five years old were, on average, paying 40 basis points above what the big four banks’ customers with new loans were paying.

## How does this affect your wallet?
At Lendi, we’ve been reducing our customers' rates by an average of 0.89% since June last year*.  

And if we look at the rates homeowners refinanced to on our platform in April 2020,  the median interest rate negotiated was 2.72% for owner occupier, principal and interest loans.

Below we examine the difference in interest payable by customers who are on our current median interest rate for refinance (2.72%) versus those paying an additional 0.26% or 0.40% or 0.89% on their rate. A few percentage points add up to a lot of additional interest. 

| $500K loan (OO, P&I, 25 year term) | Interest rate | Monthly repayment | Total interest payable over 25 years |
|-----------------------------------------------|---------------|-------------------|--------------------------------------|
| Current refi market rate                      | 2.72%         | $2,299            | $189,665                             |
| Market rate plus 0.26%                        | 2.98%         | $2,366            | $209, 758                            |
| Market rate plus 0.40%                        | 3.12%         | $2,402            | $220,714                             |
| Market rate plus 0.89%                        | 3.61%         | $2,533            | $259,814                             |

Customers paying 26 bps more than the current median refinance interest rate are paying an __extra $67 a month or $804 over 12 months__. That adds up to $20,093 in additional interest over the life of a 25 year loan.

Customers paying 40 bps more than the current median refinance interest rate are forking out an __extra $103 a month or $1,236 over 12 months__. That adds up to $31,049 in additional interest charges over the life of a 25 year loan.

Customers paying 89 bps more than the current median refinance interest rate are paying an __extra $234 a month or $2,808 over 12 months__. That adds up to $70,149 in additional interest over the life of a 25 year loan. 

Don't let the banks charge you for your loyalty. If you would like to see how much you could save, check if you are paying too much on your home loan by reviewing your rate.

## See if you can save with a lower rate
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## Got a home loan question?
We're here to help. Get free expert advice at a time that suits you. Choose a time to chat with a [Home Loan Specialist here](https://www.lendi.com.au/book-appointment/). 

*The estimated average future interest savings is calculated as at 15 April 2020 based on Lendi assisting customers into new loans with an average interest rate reduction of 0.89% for the 11 months prior, and assuming a median loan term of 26 years on both the old and new loan and all monthly principal and interest repayments will be made on time. Any future savings figures are estimated averages only, and do not take into account any product features or fees (including refinancing or break costs). Your savings will be different. 

*The information in this post is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.*
