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My mortgage rate

Discussion in 'Finance & Banking' started by jparrie, 29th Sep, 2008.

  1. jparrie

    jparrie New Member

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    Sydney
    This is for the mortgage experts out there, hopefully someone can explain this to me.

    Last November I took out a variable rate mortgage with a small lender, the rate at that time was 7.59%. Today the rate on their web site states that the rate for my particular mortgage is 8.49%. However, the rate I am paying is 8.59%.

    They have told me that my mortgage rate can be higher or lower than their advertised rate for the same product, which I find ridiculous. All I see is that I, as an existing customer, am paying 0.1% more than a new customer would.

    There is nowhere on the website that states that the rates quoted are for new loans only, and of course, all the adverts state the new lower rate in order to get new business. This is not a honeymoon or intro rate either.

    So do I have a reasonable gripe? Or is this normal practise for lenders to screw their existing customers while lowering rates for new customers? Is there any practical reason why lending rates can't benefit everybody instead of just new customers?

    Thanks for any input
    John
     
  2. Billv

    Billv Getting there

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    15th Jul, 2007
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    Location:
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    John

    0.1% is not much.
    I have a bigger difference between 2 of my loans with 1 lender.

    These days it's common practice for lenders to try and get as much as they can from existing customers.

    They know that the risk of losing existing customers is small.

    Many of the small lenders have very high exit fees so if some customers decide to leave they get hit with a few thousand $ in exit fees.

    Who is the lender?

    Cheers
     
  3. crc_error

    crc_error The Rule of 72

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    what a dirty business...
     
  4. jparrie

    jparrie New Member

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    I know 0.1% is not much - but that's not really the point. The point is that this is exactly the same product being advertised, just at a higher rate for existing customers. I think it stinks.

    I would imagine that your two loans are just that - two completely separate loans, in effect different products.

    I'll let you know who the lender is after I've finished dealing with them, I don't know what's going to happen yet but clearly I've rattled a few cages because now they're leaving 'phone messages for me!

    John
     
  5. Billv

    Billv Getting there

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    John,

    They are identical loans obtained at different times and therefore having a different starting rate.

    I was trying to merge them but this particular lender does not do it
    or the person I was talking to didn't know how to do it.

    cheers
     
  6. AsxBroker

    AsxBroker Well-Known Member

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    Location:
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    Hi guys,

    I've spoken to my bank lender and it's amazing how tricky the loans can be.

    Fortunately my bank lender knows the products better than my mortgage broker, unfortunately it doesn't help me now (because the bank lender has a narrower choice of loans they deal with them literally day-in day-out, compared to a mortgage broker who can write loans with up to 20 or 30 lenders which literally hundreds of different sorts of loans).

    Cheers,

    Dan
     
  7. jparrie

    jparrie New Member

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    Location:
    Sydney
    You say "therefore have a different starting rate". But that simply doesn't make sense. Surely any rate moves should be together, not independent of one another as both products are inextricably linked. As the cost of finance rises or falls, so every financial instrument must follow suit (unless fixed). Any decision not to move one or other rate is a a decision of the financial institution alone, surely?
     
  8. Billv

    Billv Getting there

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    John

    Actually there is a small difference between the 2 loans.
    The 1st loan was an 80% lend and the 2nd one was 85%.

    Yes they've always moved together but the difference remained and during the independent bank increases the 2nd one went up by an additional 0.2% on top of their other independent increases.

    I did not complain because I knew of the credit issues and the interest is tax deductible anyway but I do regret going with them because although initially they were cheaper than the banks, now their rates are significantly higher and are eating away my 0.7% discount.

    I was aware of their high exit fees if I terminated my loans before the 4/5 years but when I took out the loans I could not have imagined a situation where their interest rates would be higher than those of the banks.

    Many customers of small lenders are trapped in this situation and particularly those with less than 20% deposit and/or with LO DOC loans would now be finding costly and difficult to refinance.

    For me refinancing is neither hard nor very costly.
    I am now restructuring my portfolio and soon I will be terminating 1 of my loans with them and I will renegotiate the 2nd loan and if they don't come to the party, I am gone....:D

    btw the lender is AIMS home loans.

    Cheers