Loyalty tax means paying a higher rate than new customers for a similar loan.
Even a small rate gap (e.g. 0.25%–0.5%) can cost thousands over the life of your loan.
A quick rate check or comparison could reveal if you’re overpaying.
An Aussie broker can quickly compare your options and help you see if a more competitive rate is available.
Loyalty doesn’t always lead to the most competitive home loan rate.
If there’s a difference between your rate and what new customers are offered, you may be paying more than necessary. The good news is there are simple ways to check, and practical steps you can take to do something about it.
If your lender is offering lower rates to new customers than what you’re paying, you could be paying a loyalty tax, and there may be options to address it, such as negotiating, refinancing, or speaking to a broker.
What is loyalty tax?
Loyalty tax is the difference between the interest rate your lender offers new customers and the higher rate you may still be paying as an existing customer.
It often happens gradually over time. Lenders may adjust their pricing to attract new borrowers, while existing customers stay on older rates unless they review or renegotiate.
Over time, this can create a gap between what you’re paying and what’s currently available, even if you’ve been making your repayments on time.
Your local Aussie Broker can do the leg work for you and see if your lender is charging a loyalty tax on your loan.
Signs you might be paying loyalty tax
You might be paying more than necessary if:
You haven’t reviewed your rate in 1–2 years
You’ve never negotiated with your lender
You’re unsure what rates your lender offers new customers
If any of this sounds familiar, it could be worth taking a closer look at your loan.
How to check if you’re paying loyalty tax
You can do a simple check in a few steps:
Log into your lender’s online portal and find your current interest rate
Visit your lender’s website and look at the rates offered to new borrowers for a similar loan
Compare the two, any difference may indicate a “loyalty tax". You can then use a repayments calculator to estimate what that gap could cost over time.
Why does loyalty tax happen?
Home loans aren’t always “set and forget”.
What starts as a competitive rate can gradually become less so, especially if your loan isn’t actively reviewed. Loyalty tax is not always immediately visible.
Research, including ACCC findings shows that older loans often carry noticeably higher rates, with the gap increasing the longer the loan has been in place.
Over time:
Lenders introduce sharper rates and offers to entice new borrowers
Existing loans may stay on older pricing unless reviewed
Small differences in rates can widen slowly and go unnoticed.
Unless you actively review your loan, it may become less competitive compared to newer offers.
For some borrowers, reviewing or switching their loan could lead to meaningful savings over time. Without regular check-ins, that gap can continue to grow.
What could loyalty tax mean for your home loan?
Even a small difference in your rate can add up over time.
A gap of around 0.25% to 0.5% between your current rate and what’s available to new customers can result in a higher costs over the life of your loan. The larger your loan balance, the more that difference can impact what you pay.
Research from the ACCC has found that borrowers with older loans can pay noticeably higher rates than new customers. In some cases, this difference has been translated to savings of tens of thousands of dollars over the life of a loan, if a lower rate is secured.
For example, borrowers could save over $17,000 on a $250,000 loan, or $34,000 for a $500,000 home loan.
Use our repayments calculator to estimate what that difference could mean for you.
How can I avoid paying loyalty tax?
If you think you might be paying loyalty tax, there are a few ways to respond.
Negotiate with your lender
Sometimes, a simple conversation can make a difference. You can contact your lender and:
Ask them to review your current rate
Reference the rates they’re offering new customers
Let them know you’re reviewing your options.
In some cases, your lender may not offer a better rate, depending on factors like your loan size, equity and repayment history. If that happens, comparing options or speaking to a broker can help you understand what else might be available.
Consider refinancing
If your current lender can’t offer a competitive rate, refinancing may be worth exploring.
Refinancing means switching your loan to a new lender. This could offer:
A lower interest rate
More suitable features
Greater flexibility, depending on the loan
Learn more about refinancing in our refinance guide.
Before making a decision, it’s important to consider any costs involved, such as discharge fees, application fees, or other charges.
Speak to an Aussie broker
If you’re unsure where to start, an Aussie broker can help simplify the process.
An Aussie broker can:
Compare rates across multiple lenders
Help you understand what’s competitive
Negotiate with lenders on your behalf
This can help uncover options you may not find on your own and give you more confidence in your next step.
Bonus ways to reduce what you pay
Beyond your interest rate, there are other ways you may be able to reduce the cost of your loan.
Use an offset account
An offset account can help reduce the amount of interest you’re charged.
For example, if your loan balance is $500,000 and you have $30,000 in an offset account, You’ll only be charged interest on $470,000, which could help reduce the total interest you pay overtime.
Review your loan features
You may be paying for features you don’t use. Some loans include:
Package fees
Additional accounts
Extra services
Switching to a simpler loan could help reduce unnecessary costs.
Make extra repayments (if possible)
If your loan allows it, making extra repayments may help:
Reduce your loan balance faster
Lower total interest paid
Shorten your loan term
Even small additional repayments could add up over time to help reduce your interest over time.
When should you review your home loan?
Regular reviews can help you stay on a competitive rate.
Consider reviewing your loan:
At least once a year
When your fixed rate ends
After interest rate changes
If your financial situation changes
Staying proactive could help you avoid paying more than you need to.