The New Lazy Tax from the Banks for Home Mortgages?

There has been a term ‘lazy tax’ for a while, related to some retail insurance - especially for car and home and contents policies. With insurance policies, you can get a good deal by shopping around, but you can expect your premiums to increase well beyond inflation with each renewal, and in the case of vehicle insurance, premiums often increase despite the replacement value diminishing quickly (and therefore the risk to the insurer). So, unless you keep checking the market, your provider will extract a lazy tax from you.
With home loans, I used to pay a rate that was advertised publicly by the bank. That rate usually varied up or down with changes in the Reserve Bank rate. In recent years, I have found the rate I am being charged has changed in little jumps of about 0.15% ‘due to the cost of money to the bank’ or some other similar reasoning that is impossible to check. My rate is ‘variable’, but I don’t expect it to vary continuously upward when the bank can maintain a lower advertised rate to new clients with higher risk than my very low risk loan to value ratio.
My bank recently wrote to me and notified of another unavoidable rise. When I looked online, the bank was advertising a much cheaper rate than they were charging me, even before the rise. This has happened before, and my high rate was supposed to be reduced to a privileged low rate. So, I contacted the bank again and after a long phone call, they offered me a new even better discount rate. I now enjoy a whopping 0.85% discount to their ‘normal variable rate’, which isn’t related to any rate advertised on their website. My new rate is 4.1% variable. The bank has the same product available to new customers at 3.88%. The numbers suggest some of their long standing customers will be paying more than 1% higher rate than new customers.
So, I have avoided some of the lazy tax but they probably think they have brought down my rate just enough to make it not worth my while changing to another provider, but won’t offer me the rate that they offer new clients because they know there is a cost and hassle associated with re-establishing my mortgage elsewhere. I certainly don’t feel like a valued customer. There are providers in the market with a variable rate of 3.44% and low/ no fees. Do all variable rates creep now as a new bank lazy tax? It certainly looks like a lazy tax to me and a new way for the banks to make mega profits.

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Good question @babbrook.I think we can safely say that many customers are being stung for their loyalty/unwillingness to switch. We’ve heard thousands of cases where a simple phone call to your provider telling them you are ready to move is enough to earn a discount.

While is there may be a hassle/cost involved in moving your loan, it’s also a big cost for a lender to lose a customer, which is good to keep in mind when bargaining.

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