There are even more savings up for grabs for people with older mortgages, 10 years old or more, with up to $50,000 up for grabs on a loan worth $500,000. Treasurer Josh Frydenberg will release the report from the Australian Competition and Consumer Commission on Saturday.
The ACCC is recommending new rules which require lenders to provide an annual reminder to their customers comparing the current interest rate with the average interest rate paid for new loans. It is also calling for a loan discharge to take a maximum of 10 days. The Federal Government is considering the recommendations, but yet to make a decision.Mr Frydenberg said the report found that new borrowers continue to pay less on average than existing borrowers.“The ACCC found borrowers can save thousands of dollars in the first year alone by switching lenders or products or asking for a better deal,” he said.The report found that the older loans get, the wider the gap between what existing customers pay, compared to new customers.Average interest rates on new loans were 58 basis points lower than those on loans three to five years old, 71 basis points lower than those five to 10 years old and 104 basis points lower than mortgages greater than 10 years old.
Switching a $500,000 loan that is three to five years old would deliver up to a $34,000 in savings over the life of the loan, and up to $41,900 if it was five to 10 years old. The report found borrowers were often unaware of prices for new loans, while lenders make it unnecessarily difficult and lengthy to get out of the loan. It said the process discouraged borrowers for looking for better deals, which cost them in the long run.
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