Sally Tindall of RateCity said the ABC’s decision to disclose these rates will put pressure on rivals to reveal more details about how they price mortgages.
“For years, the big banks have offered special discounts to certain customers that others cannot see. I hope this decision by the ABC is one step closer to ending this cloak of secrecy,” Tindall said.
The ABC’s decision to lift the lid on its different pricing tiers comes amid a war between banks to lure low-risk customers by offering perks like low rates, cash back worth thousands of dollars, or both.
However, these offers will generally not be offered to existing customers, only to those taking out new loans or pestering their bank for a better deal.
Head of research at comparison website Mozo, Peter Marshall, says another effect of risk-based pricing is that first-time home buyers tend to be charged relatively higher rates because they usually have smaller deposits.
“These borrowers are perceived by banks to be riskier, and there’s probably some truth to that, especially in an environment of rising rates and falling house prices,” he says.
In addition to paying higher rates, people with an LVR over 80% will often need to purchase mortgage insurance, which typically adds thousands of dollars to the cost of a home loan. Rising interest rates also reduce your borrowing power, a trend that may also have a greater impact on first-time home buyers.
Indeed, the latest trends show that the number of new loans granted to first-time home buyers fell nearly 30% in the year to September.
Falling house prices should be good news for first-time buyers, but many other financial factors continue to work against them.
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- The advice given in this article is of a general nature and is not intended to influence readers’ decisions regarding investments or financial products. Investors should always seek their own professional advice which takes into account their personal circumstances before making financial decisions.