Your bank is charging you more than your neighbour pays

Bayley Clarke · Mortgage broker on the road · Last checked 14 September 2026 · 7 min read

The short answer

Your bank has two prices for the same loan. One for the people it's trying to win, and one for the people it thinks won't leave.

If you haven't asked about your rate in two years, there's a fair chance you're on the second one. Your neighbour who bought last month, same street, same loan size, same bank, may well be paying less than you. Not because they're a better borrower. Because they're new. The fix is usually not a refinance. It's one phone call to your own bank first, and a switch only if the numbers after costs say it's worth it. This page is the whole thing in order: how the two prices work, what the gap costs in real dollars, why this year made it wider, and how to find out which price you're on.

Two prices for the same loan

Here's how a bank actually prices a home loan. There's the rate on the website, the one in the ads, the one built to win new business. And there's the rate sitting on every loan they already have, which people in the industry call the back book. Those two numbers don't move together.

When the Reserve Bank lifts rates, the rise lands on the back book in full, usually within a couple of weeks. When the bank wants more customers, it sharpens the advertised rate. Nobody rings you to say the new customer price just dropped. The bank's going to go, okay, this one's been with us six years, never called, never asked. Why would we move?

That gap has a name: the loyalty tax. It isn't a fee. It isn't on your statement. It's just the difference between what you pay and what the same bank would charge you if you walked in the door tomorrow as a stranger. So for you that means the longer your loan has gone without anyone looking at it, the more likely it's drifted onto the wrong side of that line.

What the gap costs in real dollars

Rate talk goes over most people's heads, so let's put it in money. Illustrative, not a quote: on a $600k loan, a rate a quarter of a percent above where it could be is roughly $1,500 a year in extra interest. That's about $125 a month, or around $29 a week. Over five years, call it $7,500 gone for no reason other than staying put.

If your loan hasn't been touched since settlement and the gap has crept to half a percent, the same example doubles: roughly $3,000 a year, about $250 a month, close to $58 a week. That's a car registration, a family grocery shop, or a chunk of your kids' school fees, every year.

The honest caveat: the gap is often smaller than the ads make it sound, and it matters less on a small balance or a loan that's nearly paid off. Whether a quarter of a percent is worth moving for comes down to your loan size, how long you've got left, and what the switch costs. Sometimes it's worth it. Sometimes it's not. The point is to know which one you are, instead of guessing.

Why this year made it worse

The Reserve Bank lifted rates three times in the first half of 2026, then held in July and again in August. Most existing variable loans simply wore every one of those rises.

Meanwhile, the fight for new customers kept going. After the May rise, Canstar counted 23 lenders sharpening their deals for new customers. Same banks, same months. The new customer price got better while the back book got the full increase.

And it's landing on people who can least afford it. Roy Morgan's July survey put 32.5% of mortgage holders at risk of mortgage stress, the highest reading in 18 years. Not everyone in that number is paying the loyalty tax. But for the ones who are, it's money going out the door that a single phone call might claw back.

So for you that means if you haven't looked at your loan since before the first rise this year, the gap you're on today may be wider than it was twelve months ago.

Ask your own bank first

Before anyone talks refinancing, reprice first. Repricing is just asking your current bank for a sharper rate. No application, no credit enquiry, no paperwork. It's free money on the floor that a lot of people never bend down to pick up.

The call is simple. Find your rate on your latest statement. Look at what your bank is advertising to new customers for the same type of loan. Then ring and say: I've been with you for this long, I can see what you're offering new customers, what can you do for me? If you've got a better offer from somewhere else, say so. Banks move faster for people they think might actually leave.

The behavioural bit, and it's the one that costs people: most of us take the first counter-offer and hang up happy. The first number back is often not the best one on the table. If it still sits above what new customers are getting, it's not a win yet. It's a starting point.

When switching is actually worth it

If your bank won't move, or moves a little and stops, that's when a refinance is worth pricing. A refinance is a brand new loan with a bank that has never met you, so it's worth knowing what it costs before you start.

For most people the bill is small: a discharge fee from the old lender, a few government fees, and a few weeks of paperwork, and the new lender sometimes covers part of it. The costs that actually bite are the ones the ads skip. Break costs if you're walking out of a fixed rate. Lenders mortgage insurance if your equity is under roughly 20 per cent, which is its own conversation on refinancing with an LVR over 80%. And the quiet one: a switch that stretches you back out to a fresh 30 year term, so your repayment drops but you pay more over the life of the loan.

Then the new bank has to say yes. It checks whether you can afford the repayments under its own rules, today, not the rules from when you first borrowed. That's why a clean repayment history doesn't guarantee a refinance, and why some people are genuinely better off staying where they are and pushing harder on the reprice instead.

The whole process, step by step, lives in refinancing with a broker: how it actually works.

The honest part

Not everyone is paying the loyalty tax. The Reserve Bank's own figures show that across the whole market, the average existing loan and the average new loan sit fairly close together this year. But an average is made of the people who ring their bank every year and the people who haven't rung in six. If you're in the second group, the average isn't your number.

If I look at your loan and it's already sharp, I'll tell you, and you'll have spent fifteen minutes finding out you can stop wondering. If a reprice gets you there, I'll tell you to do that and not move at all. I only suggest a switch when the numbers after costs are clearly in your favour.

And you don't pay me for any of it. I get to charge the bank for the work that I do, not you. I've settled over $110 million in loans, and there are 110+ Google reviews from the people I've done it for.

Want to know which price you're on?

A 15 minute call. Have your latest home loan statement handy and I'll tell you where your rate sits against what's out there, whether a reprice should do it, and whether a switch is worth the cost. Before anything goes near an application.

Book a 15 minute call Call 0437 189 939

No application, no credit check, nothing on your file. The bank pays me when a loan settles.

Common questions about the loyalty tax

What is the loyalty tax on a home loan?+

It's the gap between the rate a bank gives the customers it's trying to win and the rate it leaves on the customers it thinks won't leave. It isn't a fee and it isn't printed on your statement. It builds up quietly when rates rise and nobody ever looks at your loan.

How do I know if I'm paying it?+

Find the rate on your latest statement, then look at what your own bank is advertising to new customers for the same type of loan. If yours is higher, you're paying it. If you haven't asked your bank about your rate in two years or more, there's a fair chance you are.

Should I ask my bank for a better rate or refinance?+

Ask your bank first. A reprice costs nothing and there's no application. If they won't move, or the number they come back with still isn't sharp, that's when a refinance is worth pricing, after the switching costs.

Is it worth switching for a small rate difference?+

It depends on your loan size, how long you've got left, and what the switch costs. Illustrative, not a quote: a quarter of a percent on a $600k loan is roughly $1,500 a year in interest. On a small balance, or a loan a few years from paid off, the same gap may not cover the cost of moving.

Does refinancing hurt my credit score?+

A new application puts an enquiry on your credit file, which is a small effect for most people. Asking your own bank for a better rate doesn't. That's one more reason to reprice first and only apply elsewhere once the numbers say it's worth it.

Do I pay a broker to check my rate?+

No. I get to charge the bank for the work that I do, not you. The lender that ends up with your loan pays me when it settles, and if the answer is to stay where you are, the check costs you nothing.

Next question

Repricing vs refinancing: which first?

Reprice first. It's free, it takes one phone call, and it's where most people should start before anyone mentions switching.