{"id":370,"date":"2023-09-19T05:37:53","date_gmt":"2023-09-19T05:37:53","guid":{"rendered":"https:\/\/justimaginefinance.com.au\/?p=370"},"modified":"2025-07-15T03:02:57","modified_gmt":"2025-07-15T03:02:57","slug":"how-misguided-loyalty-to-your-lender-could-be-costing-you-thousands-each-year","status":"publish","type":"post","link":"https:\/\/justimaginefinance.com.au\/?p=370","title":{"rendered":"How misguided loyalty to your lender could be costing you thousands each year"},"content":{"rendered":"<p>Ever heard of the \u2018loyalty tax\u2019? This is something far too many borrowers pay. And it\u2019s very costly.<\/p>\n<p>The loyalty tax is the extra interest a borrower gets charged because they remain loyal to their current lender and stick with a higher-priced home loan, despite having the option to refinance to another lender offering a comparable loan with a lower interest rate.<\/p>\n<p>That interest rate differential could add up to thousands of dollars per year and tens of thousands (or even hundreds of thousands) of dollars over the life of the loan.<\/p>\n<p>There are three main reasons borrowers pay the loyalty tax:<\/p>\n<ul class=\"defaultList\">\n<li>Misguided loyalty \u2013 they think that if they\u2019re loyal to their bank, their large, profit-driven bank will be loyal to them<\/li>\n<li>Lack of knowledge \u2013 they don\u2019t realise there are better options available<\/li>\n<li>Lack of time \u2013 they think it will be too time-consuming to refinance<\/li>\n<\/ul>\n<p>Before we explain why you shouldn\u2019t let those three reasons hold you back from switching to a better loan, let\u2019s explore the loyalty tax in more detail.<\/p>\n<p>Why the loyalty tax exists<\/p>\n<p>The graph below, from the Reserve Bank of Australia, tells you everything you need to know about the loyalty tax.<\/p>\n<p>As of July, the most recent month for which is data, average interest rates for owner-occupiers with a variable home loan were:<\/p>\n<ul class=\"defaultList\">\n<li>3.99% for existing customers (top line)<\/li>\n<li>3.51% for new customers (bottom line)<\/li>\n<\/ul>\n<p>In other words, banks were charging loyal customers an extra 0.48 percentage points in interest.<\/p>\n<p><img decoding=\"async\" id=\"1986364305\" class=\"\" src=\"https:\/\/lirp.cdn-website.com\/332ef82e\/dms3rep\/multi\/opt\/RBA+Variable+rates+-1920w.png\" alt=\"\" width=\"1200\" height=\"800\" data-dm-image-path=\"https:\/\/irp.cdn-website.com\/332ef82e\/dms3rep\/multi\/RBA+Variable+rates+.png\" \/><\/div>\n<p>The mortgage market is fiercely competitive, so lenders know they need to offer low interest rates to win new business. At the same time \u2013 due to the three reasons mentioned above \u2013 lenders are happy to slug loyal borrowers with higher rates, because they know many of them are willing to pay the loyalty tax.<\/p>\n<p>How to stop paying the loyalty tax<\/p>\n<p>If you want to avoid the loyalty tax, speak to a good mortgage broker, like Just Imagine Finance.<\/p>\n<p>Your broker can approach your lender on your behalf and ask for a discount. If the lender says no or doesn\u2019t provide a large enough discount, your broker can then refinance you to a better home loan.<\/p>\n<p>That brings us back to the three main reasons borrowers pay the loyalty tax, and why those reasons shouldn\u2019t deter you from refinancing:<\/p>\n<ul class=\"defaultList\">\n<li>Loyalty to your bank shouldn\u2019t hold you back \u2013 because if your bank is going to be disloyal to you by charging you higher interest rates than new customers, there\u2019s no reason why you should be loyal in return<\/li>\n<li>Lack of knowledge shouldn\u2019t hold you back \u2013 because you don\u2019t need to know about all the other home loan options in the market; that\u2019s your broker\u2019s job<\/li>\n<li>Lack of time shouldn\u2019t hold you back \u2013 because your broker will do most of the work for you<\/li>\n<\/ul>\n<p><a href=\"https:\/\/justimaginefinance.com.au\/the-top-4-reasons-to-refinance-your-home-loan\" target=\"_blank\" rel=\"noopener\"><br \/>\nRefinancing<\/a><span class=\"\"> does involve some effort and there is an upfront cost. But it could deliver you massive savings over the life of the loan.\u00a0<\/span><\/p>\n<p>The alternative is to keep paying the loyalty tax and let your bank grow richer at your expense.<\/p>\n<p>Worried you might be paying the loyalty tax? Just Imagine Finance can let you know if you\u2019re able to switch to a comparable loan at a lower interest rate. Contact Catherine on 0414 673 359 or catherine@justimaginefinance.com.au<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Ever heard of the \u2018loyalty tax\u2019? This is something far too many borrowers pay. And it\u2019s very costly. The loyalty&hellip; <a class=\"more-link\" href=\"https:\/\/justimaginefinance.com.au\/?p=370\">Continue reading <span class=\"screen-reader-text\">How misguided loyalty to your lender could be costing you thousands each year<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-370","post","type-post","status-publish","format-standard","hentry","category-uncategorized","entry"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.5 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>How misguided loyalty to your lender could be costing you thousands each year - Just Imagine Finance<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/justimaginefinance.com.au\/?p=370\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How misguided loyalty to your lender could be costing you thousands each year - Just Imagine Finance\" \/>\n<meta property=\"og:description\" content=\"Ever heard of the \u2018loyalty tax\u2019? 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The loyalty&hellip; Continue reading How misguided loyalty to your lender could be costing you thousands each year\" \/>\n<meta property=\"og:url\" content=\"https:\/\/justimaginefinance.com.au\/?p=370\" \/>\n<meta property=\"og:site_name\" content=\"Just Imagine Finance\" \/>\n<meta property=\"article:published_time\" content=\"2023-09-19T05:37:53+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2025-07-15T03:02:57+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/justimaginefinance.com.au\/wp-content\/uploads\/2023\/09\/Headinhands-1920w.webp\" \/>\n\t<meta property=\"og:image:width\" content=\"1280\" \/>\n\t<meta property=\"og:image:height\" content=\"853\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/webp\" \/>\n<meta name=\"author\" content=\"Catherine Salat\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Catherine Salat\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/justimaginefinance.com.au\\\/?p=370#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/justimaginefinance.com.au\\\/?p=370\"},\"author\":{\"name\":\"Catherine Salat\",\"@id\":\"https:\\\/\\\/justimaginefinance.com.au\\\/#\\\/schema\\\/person\\\/0196e21a5c25abbea83a527a6f27db8d\"},\"headline\":\"How misguided loyalty to your lender could be costing you thousands each year\",\"datePublished\":\"2023-09-19T05:37:53+00:00\",\"dateModified\":\"2025-07-15T03:02:57+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/justimaginefinance.com.au\\\/?p=370\"},\"wordCount\":572,\"image\":{\"@id\":\"https:\\\/\\\/justimaginefinance.com.au\\\/?p=370#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/lirp.cdn-website.com\\\/332ef82e\\\/dms3rep\\\/multi\\\/opt\\\/RBA+Variable+rates+-1920w.png\",\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/justimaginefinance.com.au\\\/?p=370\",\"url\":\"https:\\\/\\\/justimaginefinance.com.au\\\/?p=370\",\"name\":\"How misguided loyalty to your lender could be costing you thousands each year - 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