Now that we had three Reserve Bank interest rates cuts in June, July and October 2019 and banks have not passed in full the Reserve Bank cuts, the topic of the "Loyalty Tax" has surfaced.
Withhold some of the Reserve Bank rate cuts for existing loyal customers but offer ever increasing discounts for new business.
On 5 April 2018, Rod Simms, Chairperson of the Australian Competition and Consumer Commission said, “It is extremely difficult for
consumers to compare the home loan rates offered by different lenders because the headline price is a starting price and the actual
interest rate may be as much as 78-139 basis points below the advertised rates”.
He added, “What’s more, the size of the discount from the headline rate may only be revealed deep in the application process, which
means borrowers essentially need to go through the time-consuming process of lodging an application with multiple lenders in order to
make an informed decision”.
The lack of home loan interest rate transparency for those lenders that offer 'discretionary' pricing and do not publish their best interest rate forward for all to see, is perhaps because it allows them to offer customers varying levels of discounting therefore controlling the consumer.
Do not horse trade with these lenders. We encourage this.