Data compiled by comparison website Mozo suggests that there is a growing gap between the rates of major banks and other lenders.
Last year, the average advertised home loan rates for major banks were around 0.25 percentage points higher than other lenders, according to Mozo.
This year, with rate hikes announced by a number of banks coming into effect soon, the gap has approximately doubled to 0.53 percentage points.
With such conditions, customers should be more inclined to refinance their loans for better deals, especially if the market is as competitive as it bills itself to be. This would make the major banks rethink their prices or risk losing their market share.
Meanwhile, Aussie Home Loans said that an increase in refinancing has already occurred in recent months. While official figures have yet to confirm this, an increase would make sense given the circumstances.
According to Mozo, the average standard variable interest rate offered by lenders other than the major four is 5.08%, compared with the average rate for Commonwealth Bank, National Australia Bank, ANZ Bank and Westpac, at 5.61%.
For customers with a $300,000 loan with one of the four major banks, this means paying roughly an additional $90 monthly on mortgage payments.
Notably, most customers do not pay the standard variable rate due to the discounts they receive. Advertised rates, however, remain a good benchmark to refer to, and can help indicate a widening gap in rates.
Brian Johnson, CLSA analyst, noted that a number of small lenders (including non-banks) have not followed the rate increasing trend set by the major banks. Johnson hinted that smaller lenders have an opportunity to grab some of the major banks’ market shares.
There are more than 15 lenders offering variable interest rates 4% and lower, said Kirsty Lamont of Mozo. Many of these lenders are small and online-based and not many have increased their rates to date.
"We haven't seen any of the really sharp lenders announce any rate hikes," Lamont said.
Current customers should not expect the competition to benefit them immediately, however.
Customers will have to compare their rates to those available in the market, and then decide if they are currently getting a good deal.
With interest rates at their lowest for more than 50 years, there are some great rates available. The best thing to do is to compare rates from all the lenders. Let us help take the leg work out of doing this - Compare Home Loans now