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A mortgage marketplace has revealed which Australian suburbs are the most ripped off when it comes to their interest rates.
HashChing has released data showcasing the suburbs in Australia where mortgagees are paying the highest interest rates, and it has highlighted some worrying discrepancies.
More than 1,000 mortgage applications over December 2016 and January 2017 were analysed in the data, which showed that several suburbs in Sydney, Melbourne and Brisbane had borrowers who were paying well above the average home loan interest rate.
Melbourne’s mortgages told a similar story; the average rate is 4.46 per cent but those in Blackburn, Glen Waverley, South Morang, Mernda, Narre Warren and Cranbourne were paying rates as high as 7.04 per cent.
In Brisbane there was also a large difference; the average sits at 4.72 per cent but in the suburbs of Labrador, Surfers Paradise, Brendale and Springbrook the home owners were paying interest rates as high as 7.39 per cent., Advancetown, Austinville,
A factor behind the higher interest rates in these suburbs is the larger populations of self-employed borrowers, according to Mandeep Sodhi, CEO of HashChing.
“The data demonstrates that mortgagees who are paying interest rates of more than 5 per cent tend to be currently or formerly self-employed, and this is due to a misconception that they aren’t able to negotiate a better rate,” said Mr Sodhi.
“Previously, banks charged higher interest rates for self-employed borrowers as they were deemed riskier due to an unstable income. However, the market has changed, and banks have become more amenable to offering a competitive interest rate to these customers,” he said.
Self-employed borrowers were found to be paying as much as 1 per cent more on average than salaried borrowers; on a $500,000 loan over 25 years this amount can equal an additional $87,383 over the life of the loan.
“Self-employed borrowers may not realise they can get a better home loan rate, especially as this information isn’t being communicated from their bank or lender, and this disconnect is costing them tens of thousands of dollars,” said Mr Sodhi.
The survey also showed how many Australians are beginning to grow tired of the big four banks; Commonwealth Bank had the highest number of possible mortgage deserters at 17 per cent.
ANZ and NAB came second with 13 per cent and Westpac had 12 per cent of mortgagees who were potentially looking to refinance.
“Sticking to the same home loan provider out of some misguided sense of loyalty is costing borrowers tens – or even hundreds – of thousands of dollars over the life of their home loan,” said Mr Sodhi.
“The good news is that our data demonstrates that Aussies have finally had enough. There’s now an exodus from the big banks and a rush to refinance with more competitive lenders,” he said.
“Despite the fact that the big four banks (along with some of the smaller financial institutions) have hiked up their interest rates, there are still plenty of low interest rate options out there for borrowers who do their homework,” said Mr Sodhi.