Australian lenders routinely offer their best rates to new customers while existing borrowers sit on higher 'back book' rates — a phenomenon known as the loyalty tax. Research by the ACCC has consistently found that long-standing borrowers pay materially more than new customers with the same loan profile. Here are the seven clearest signs that your home loan is overdue for a review — and what to do about it.
Signs 1–3: Your Rate, Your Lender, and Your Loyalty
Sign 1 — Your rate has not been reviewed in 12 months: The mortgage market changes constantly. New lenders, new products, and RBA rate movements all shift what is competitive. If you have not actively compared your rate in the last 12 months, you are almost certainly paying more than you need to.
Sign 2 — The RBA has cut rates but your variable rate has not moved proportionally: Lenders are quick to raise variable rates when the RBA increases the cash rate, but often slow to pass on cuts. If the RBA has cut rates since your loan was settled, check how much of that reduction your lender has passed through. Any unexplained gap between the cash rate movement and your rate change is money left on the table.
Sign 3 — You are paying your lender's standard variable rate (SVR): If your fixed rate period has ended and your loan reverted to the SVR, you are almost certainly on a higher rate than necessary. The SVR is the lender's highest variable rate — designed for customers who are not actively engaged. Moving to a discounted variable rate — with your current lender or another — should be an immediate priority.
The Loyalty Tax Is Real
ACCC analysis of the mortgage market has repeatedly found that borrowers who have held their loan for five or more years pay approximately 0.3–0.6% more than new customers with the same lender for the same product profile. On a $600,000 loan, that is $1,800–$3,600 per year. Refinancing — or simply negotiating a rate reduction — addresses this immediately.
Signs 4–5: Your Equity Position and Life Circumstances Have Changed
Sign 4 — Your LVR has crossed a lower threshold: If your loan-to-value ratio has fallen below 80% (or below 70% or 60%) through repayments or property value growth, you may qualify for a materially better rate. Lenders price loans based on LVR tiers, but they do not automatically reprice your loan as your LVR improves. You need to ask — or refinance. A formal valuation will confirm your current LVR.
Sign 5 — Your income or circumstances have improved: If your income has increased significantly, you may now qualify for a lower rate, a higher loan amount (to fund renovations or an investment), or better product features. Self-employed borrowers who now have two years of strong financial accounts are also in a better position than they were at their original application. Improved circumstances should translate to improved loan terms.
Signs 6–7: Better Features Are Available and Debt Consolidation Opportunities Exist
Sign 6 — Your current loan lacks features you now want: Perhaps you want an offset account but your current loan does not offer one. Maybe you want to split fixed and variable, or access a redraw facility. If your loan product does not meet your current needs, refinancing to a product that does — even at the same rate — can improve your financial efficiency significantly.
Sign 7 — Debt consolidation makes sense: If you have accumulated high-interest debt (personal loans, credit cards) alongside your home loan, consolidating these into your mortgage at a significantly lower interest rate can reduce monthly outgoings and total interest paid. This requires careful analysis — extending the term of the debt to 30 years at a lower rate may not always reduce total interest paid — but in many scenarios it is the right strategy.
Debt Consolidation Requires Discipline
Consolidating personal debt into your home loan reduces the interest rate on that debt — but extends its term dramatically. If you pay off a $30,000 personal loan at 10% p.a. over 5 years, you pay $8,250 in interest. If you consolidate it into a 30-year home loan at 6%, you pay $35,000+ in interest. Consolidation only makes sense if you make additional repayments to reduce the home loan balance faster.
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About the Author
Sakib Manzoor
Senior Finance Wellness Expert
Sakib Manzoor is the founder of Secure Finance and brings extensive experience in Australian mortgage broking and financial wellness. Specialising in helping clients achieve their property finance goals through personalised strategies and expert guidance, Sakib is FBAA accredited and committed to providing clear, actionable advice. All content is written to meet Australian regulatory standards and is regularly updated to reflect current market conditions.