Mortgage wars: Banks claim lower discounted rates than building societies and credit unions

The banking sector has hit back at claims by building societies and credit unions that they offer significantly higher variable mortgage rates.

A campaign by the Customer Owned Banking Association claims that the average standard variable rate for customer owned banking institutions is 5.75%, which is 0.42% lower than the major banks.

This, it says, will save home loan customers around $64 a month or $19,220 over the life of a $250,000 loan.

In response, Australians Bankers’ Association (ABA) chief executive Steven Munchenberg said very few people pay the advertised standard variable rate, with most bank customers paying less.

In a blog post, he quoted ABA research showing that when mortgage discounts are factored in, bank customers pay on average a variable rate of 5.59% below the 5.62% offered by building societies and credit unions once their discounts are factored in.

This was based on the ABA analysing the full range of actual advertised rates for 518 variable home loan products offered by banks and others to customers, based on Canstar’s data for June 2013.

“The results suggest there is very little difference between banks and CUBS (credit unions and building societies,” writes Munchenberg.

“Of course, the CUBS draw comparison with just the major banks, but even here, the major banks’ average home loan interest rate, including their sub-brands, is 5.59%, below the average for the CUBS.”

He also points out that the analysis shows that one credit union has the lowest rate on offer, at 4.29% (without naming the institution) but that another unnamed credit union has the highest rate, at 7.45%.

“The message here is a simple one.  There’s no black and white ‘banks bad, credit unions good’.

“There are, however, more than 500 different home loan products from over 100 different lenders.

“If a customer feels they are paying too much, or they want a better deal, they should talk to their bank or get onto one of the comparison websites, like Canstar (www.canstar.com.au), and shop around. 

“You can also negotiate with a lender to see if they’ll offer you a discounted rate.  The best deal might be with a bank, a credit union, a building society or some other lender, but look at the actual rates, not sweeping generalisations,” he says.