How To Avoid Rate Creep

If you’ve had a home loan for some time and you don’t usually review your statements (be honest, many are guilty of this), I could almost guarantee that you’ll be paying a higher interest rate than a new customer on the same loan.

– Why is this? Well, it’s called home loan rate creep.

You see, banks charm new customers with incentives like cashbacks, honeymoon rates and various rate discounts. However, banks have always seemed to neglect their existing customers in terms of any reward for long term loyalty.

Over time, out of cycle rate increases and failures to pass on full rate cuts sees existing customer rates slowly creep up, whilst new customers are offered the latest pricing discounts.

This is a deliberate strategy that the banks use to charge existing customers more and more interest. These banks make millions of dollars every day from unwary home owners.

– How can you avoid home loan rate creep?

Reviewing your loan statements and checking your current interest rate on a regular basis will help you identify any trends. You have every right to question any rate rises and make firm requests for a better rate. Remember, banks rely on customers to just sit on their home loan to make money. If you feel you deserve better (who doesn’t?), maybe it’s time to make a switch.

We recommend getting a professional home loan review every 2-3 years to possibly take advantage of the latest discounted rates.

Engaging a good mortgage broker can help you avoid rate creep and save you thousands over the life of your loan. We work for YOU (not the banks), by providing a FREE service; comparing products, advising on loan structuring and navigating the banks policies and processes, to save you time and money and helping you reach your goal. Talk to us today.