Are You Paying the Loyalty Tax?

Healthcare Home Loans
Jul 4
2 min read

Updated: Jul 9

are you still on the right rate: graphic, rate image

How “Rate Creep” and Loyalty Tax Are Quietly Costing Healthcare Workers Thousands

Many Australians, including healthcare professionals, assume that their banks will automatically adjust their mortgage rates in line with market changes. However, this assumption can be costly.

The Hidden Cost of Staying Put

Banks often offer lower interest rates to attract new customers, while existing customers may find their rates creeping up over time - a phenomenon known as "rate creep." This practice leads to a "loyalty tax," where long-term customers pay higher rates than new ones.

According to the Australian Competition and Consumer Commission (ACCC), the average difference in interest rates paid by new and existing variable rate customers can be substantial. For example, borrowers with loans over 10 years old were, on average, paying about 1.04% more than the average interest rate paid for new loans.

This difference can translate into thousands of dollars in additional interest payments annually. For instance, on a $500,000 loan, a 0.5% higher interest rate could mean paying an extra $2,500 per year.

Banks Don't Always Pass on Rate Cuts

When the Reserve Bank of Australia (RBA) cuts the cash rate, banks are not obligated to pass on the full reduction to existing customers. Some banks may delay passing on the cut or only apply a portion of it. Additionally, even when rates are reduced, borrowers may need to contact their lender to adjust their minimum monthly repayments.

Taking Control of Your Mortgage

It's crucial to regularly review your mortgage to ensure you're not overpaying. Here's how:

Check Your Current Rate: Know your current interest rate and compare it with the rates offered to new customers by your lender and competitors.
Negotiate with Your Lender: Contact your bank to request a rate review. Be prepared to discuss better offers you've found elsewhere.
Consider Refinancing: If your lender isn't willing to offer a competitive rate, refinancing with another institution could save you thousands over the life of your loan.

Join our webinar this July Market Update: New Year. New Rates. New Policies. Are You Ready?

🧠 Feeling Uncertain About the Market? You’re Not Alone.

The financial year has reset. Rates have shifted. Lending policies have changed (again). And if you're like most healthcare professionals, you're asking: