Are You Secretly Paying ‘Loyalty Tax’ on Your Home Loan?
Loyalty is admirable — but when it comes to your home loan, it could be costing you thousands.
Many homeowners stay with the same lender for years without reviewing their interest rate. The result? You may be quietly paying what’s known as a “loyalty tax” — a higher interest rate than what your lender offers new customers.
With interest rates shifting and competition between lenders heating up, now may be the ideal time for a home loan review.
What Is Loyalty Tax on a Home Loan?
“Loyalty tax” refers to the extra interest long-term borrowers can end up paying simply for staying with the same lender.
To win new business, banks frequently advertise:
Lower introductory rates
Cashback offers
Discounted package fees
However, these offers are not always automatically applied to existing customers.
Over time, your interest rate can drift higher compared to current market offers, and unless you check, you may never realise it.
How Much Could Loyalty Tax Be Costing You?
Even a 0.30% difference in interest rate can make a noticeable impact.
For example:
On a $700,000 loan, a 0.30% higher rate could cost roughly $2,100 per year in extra interest.
Over five years, that’s more than $10,000, simply for not reviewing your loan.
That’s why a regular home loan health check can be so valuable.
Why Reviewing Your Home Loan Matters in 2026
The lending landscape has changed significantly:
Banks are competing hard for quality borrowers.
Property values in regional markets like Wollongong remain resilient.
If your property has increased in value, your loan-to-value ratio (LVR) may have improved — giving you stronger negotiating power.
What To Do If You Think You're Paying Loyalty Tax
1️⃣ Compare Your Rate
Check your lender’s advertised rates for new customers. If they’re lower than yours, that’s a red flag.
2️⃣ Negotiate
You can ask your lender for a discretionary discount. A strong repayment history and lower LVR help your case.
3️⃣ Consider Refinancing
Refinancing can:
Lower your interest rate
Reduce repayments
Unlock equity
Access better loan features
As a mortgage broker in Wollongong, we compare multiple lenders for you and explain the true cost vs benefit before you make a decision.
Is Refinancing Complicated?
Refinancing is typically much simpler than buying property.
There’s:
No contract of sale
No real estate agent
Fewer parties involved
Often it’s just paperwork, valuation and settlement coordination.
Ready to See If You’re Paying Loyalty Tax?
If you haven’t reviewed your mortgage in the past 12–24 months, it may be worth checking.
For homeowners in Wollongong and the Illawarra, a quick home loan review could reveal whether your rate is still competitive.
We’ll run the numbers, compare lenders, and explain your options clearly — so you can decide what makes sense for you.
Get in touch to book your home loan health check.