There’s a well-documented phenomenon in Australian mortgage lending called the loyalty tax. It works like this: banks offer their sharpest rates to new customers to win business, while existing customers — the loyal ones — quietly pay more. The longer you stay, the more you tend to overpay.
If you’re a Sydney borrower who hasn’t reviewed your mortgage in the last 2–3 years, there’s a reasonable chance this is happening to you right now.
How the Loyalty Tax Works
When lenders compete for your business upfront, they sharpen pencils. Comparison rates, cashback offers, waived fees — the incentives stack up. Once you’re settled and repaying, the urgency is gone.
Rate pricing is not uniform within a bank. The same lender may have multiple rate tiers — what you pay depends on when you originated your loan, whether you’ve negotiated, and whether the lender thinks you’re likely to leave. Customers who don’t push back tend not to get the best rate automatically.
ACCC research has previously estimated that long-term mortgage holders in Australia pay materially more than new customers with the same loan type at the same institution. The gap doesn’t have to be enormous to be significant. On a $900,000 loan, a 0.25% rate difference costs you $2,250 per year. Over 5 years: $11,250. That’s not a rounding error.
What “Comfortable” Costs You
The reluctance to switch usually comes down to friction. Refinancing feels like effort. There’s paperwork, a valuation, time off work for bank appointments — or at least that’s how it used to feel. In 2026, a well-run broker can handle most of the legwork, and digital settlements have streamlined the process considerably.
The real question is: what has your comfort cost you? Pull up your current rate, compare it to what new customers are being offered at competing lenders today, and do the arithmetic. Be honest with yourself.
“But I Have a Good Relationship With My Bank”
Relationships with banks are largely transactional. Your relationship manager may be responsive and pleasant — but they’re constrained by the products their institution offers and the pricing bands their credit team controls. They can sometimes negotiate within a band, but they can’t match what a competing lender is offering if it falls outside their policy.
A good relationship with a bank is worth something. It’s not worth thousands of dollars per year.
When to Stay and When to Switch
Switching isn’t always the right call. There are scenarios where staying makes sense:
- You’re fixed and the break cost outweighs the savings
- You’ve recently refinanced and are inside a cashback clawback period
- Your financial situation has changed and serviceability elsewhere is uncertain
- You have specific features (like a sophisticated offset structure) that your lender handles well
But outside those scenarios — if you’re variable, your LVR is under 80%, your income is stable, and you haven’t reviewed your rate in 2+ years — there’s a strong probability the market has moved past you.
What a Rate Review Actually Involves
A mortgage review with a broker is not a commitment to refinance. It’s a current picture of:
- What you’re paying now
- What comparable lenders are offering today
- Whether your current lender will price-match under competitive pressure
- What switching would cost and how long before you’re ahead
Sometimes the outcome is: stay and negotiate. Your broker contacts your current lender, references competitive offers, and requests a rate reduction. Many lenders will move — especially if you have a clean repayment history and equity in the property.
Sometimes the outcome is: switch. The math is clear, the process is manageable, and the saving is real.
You won’t know until you look.
The One Action Worth Taking Today
Call your current lender and ask what rate new customers are being offered on a loan like yours. Then call us.