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NSW mortgage rates differ by 1.91%

NSW mortgage rates differ by 1.91%

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There is a “massive discrepancy” in home loan interest rates across NSW, even within the same suburbs, a new research from HashChing and Digital Finance Analytics has found.

According to the research, which looked at more than 700 loans settled through HashChing brokers between 27 February 2017 and 4 September 2017, there was a difference of nearly 2 per cent (1.91 per cent) in mortgage rates in the eastern state. 

Looking at the loans, the highest rates of difference were in the Inner West, Eastern Suburbs and the North Shore, at 1.83 per cent, 1.65 per cent and 1.51 per cent, respectively.

The lowest average disparity in rates was for those living in the Western Suburbs, where the range was 0.97 per cent.

The data indicated that new owner-occupied loans across the Sydney CBD, the Northern Beaches and the Western Suburbs all had average interest rates above 4 per cent, while South Sydney, the Eastern Suburbs, the Inner West and the North Shore sat just below (at 3.95 per cent, 3.94 per cent, 3.89 per cent and 3.96 per cent, respectively).

The average refinanced owner-occupied rate in the Inner West was a high 4.12 per cent, followed by the Eastern Suburbs (3.99 per cent) and the North Shore (3.95 per cent). 

HashChing found that, in some cases, borrowers could be paying $72 more per week (or $87,027 over 25 years) than their neighbour on the same loan.

Likewise, neighbours on refinanced owner-occupied loans were experiencing a 235 basis point disparity in some suburbs, equating to $201,704 over 25 years.

Multiple suburbs were also found to have both the lowest and highest interest rates on the same type of loans for their region. For example, home owners in Artarmon had the lowest (3.94 per cent on a $950,000 loan) and the highest rates (4.45 per cent on a $600,000 mortgage) on the North Shore for new owner-occupier loans.

Likewise, the suburb recorded rates of between 3.85 per cent and 5.79 per cent for refinance loans of $420,000.

According to the online mortgage marketplace, borrowers paying higher rates could “essentially [be] adding an extra three years of mortgage repayments compared to those on a lower rate”.

Speaking to The Adviser, the CEO of online mortgage marketplace HashChing, Mandeep Sodhi, said that those paying the highest rates were typically self-employed, held multiple credit cards and had a deposit of less than 20 per cent. 

However, he suggested that consumers “need to do more” with their home loan and should look at refinancing through a broker.

He said: “We were surprised to see that some borrowers, such as self-employed borrowers, had rates of up to 7.5 per cent — and had done for quite some time. 

“By using a broker through HashChing, we were able to cut that down to 5.5 per cent, which is a substantial saving.”

He also noted that the platform's "trusted brokers" were able to secure borrowers a discount of 0.99 per cent on some big four bank loans.

Mr Sodhi said: “To secure the best rates, borrowers should seek advice and representation from a trusted broker.”

Push for refinancing

Martin North, principal of Digital Finance Analytics, added that while loan rates are determined by a range of factors (for example, whether it is a new loan or a refinanced loan, where the property is located, the type of loan, the loan-to-value ratio, and how the loan is negotiated), “borrowers shouldn’t necessarily take the first rate they are offered”.

Mr North said: “It is not in a lender’s interest to automatically offer the golden egg. Rather, a negotiation has to take place, and borrowers have to have an appetite for it.

“The lender is providing a service for you, so be prepared to negotiate, or use a broker to help get the best deal.” 

Those who have already settled on a home loan were also called to be more proactive in reviewing their rate and situation frequently.

“Too often borrowers have a ‘set and forget’ mentality when it comes to their mortgage," the principal said. "What they don’t realise is you can actually renegotiate a better rate with your current lender, or switch providers entirely which can save thousands, often completely outweighing any switching costs that may be involved."

Likewise, financial comparison website RateCity has suggested that borrowers could "save tens of thousands" of dollars refinancing. 

Following the RBA's decision to keep the cash rate on hold for another month, RateCity suggested that owner-occupiers paying principal and interest at the average rate of 4.31 per cent could save up to $50,076 by switching to one of the lowest rates on the market (of 3.44 per cent). 

Investors paying interest-only at the average rate of 4.89 per cent could reportedly save up to $59,524 by switching to one of the lowest rates on the market (of 3.94 per cent).

“Just because the cash rate’s standing still doesn’t mean mortgage holders should,” RateCity money editor Sally Tindall said. 

“A $50,000 saving is not to be sneezed at. That’s a lot of people’s annual salaries, right there,” she said. 

A recent RateCity survey found that a third of Australians hadn’t changed lenders since they opened their first bank account as a child.

She said: “If you’re struggling to make ends meet, it might be time to break up with your bank.

“Refinancing to a lower-cost lender can help you pay down your debt before rates rise.”

Similarly, the managing director of broker-owned mortgage brand 1300HomeLoan, John Kolenda, said that while official rates remain low, the lending environment remained highly competitive and home loan customers should always be reviewing their mortgage and seeking a better deal.

“Complacency is the biggest problem for mortgage holders and they should seek advice from a mortgage broker to find the most competitive interest rates on offer,” the director said.

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NSW mortgage rates differ by 1.91%
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Annie Kane

Annie Kane

Annie Kane is the editor of The Adviser magazine, Australia’s leading magazine for mortgage brokers. As well as writing news and features on the Australian mortgage market, financial regulation, fintechs and the wider lending market – Annie is also the host of the Elite Broker podcast and regulator contributor to the Mortgage Business Uncut podcast. 

Before joining The Adviser team at Momentum Media in 2016, Annie wrote for a range of business and consumer titles, including The Guardian (Australia), BBC Music Magazine, Elle (Australia), BBC Countryfile, BBC Homes & Antiques, and Resource magazine.

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