By Will Kiln | Published 21 October 2026 | Last Updated 21 October 2026
Interest rates, lender policies and market data referenced in this article are current as at October 2026. The RBA cash rate is 4.60%. Rates and policy change frequently — contact us for the latest figures.
Your bank is almost certainly offering a better rate to a stranger than it's offering you.
This isn't a scandal — it's the business model. Lenders discount hard to win new loans and don't proactively pass those discounts back to the existing book, because most existing customers never ask. The gap between the two is the loyalty tax, and on an older loan it's routinely 0.3% to 0.8%.
On a $900,000 balance, 0.5% is about $4,500 a year. It takes roughly ten minutes to find out whether you're paying it, and about a week to fix.
Step one: find your actual rate
Not the rate you remember agreeing to. The rate on your most recent statement or in your banking app, today.
Write down:
- Your current interest rate
- Your loan balance
- Your remaining term
- Whether it's owner-occupied or investment, principal and interest or interest-only
Those four things determine everything that follows. Owner-occupied P&I loans get the sharpest pricing in the market; investment interest-only sits at the other end.
Step two: find your LVR
Estimate your property's value conservatively — what a cautious valuer would say, not what the neighbour's place sold for on a good day. Divide your balance by that figure.
LVR drives pricing in tiers, and the thresholds are sharp rather than gradual. Most lenders price differently at 80%, and a number have a further tier at 70% and again at 60%. If you're at 81%, getting under 80% is worth real money and may be achievable with a small lump sum.
If you've owned the property for a few years, your LVR is probably materially better than it was at settlement, and your rate may not have been adjusted to reflect that. Nobody at the bank will do that for you.
Step three: find the comparison point
You need to know what your own lender is offering new customers with your profile, and what the sharper lenders in the market are offering.
The first is on your lender's website — look for the advertised rate for a new owner-occupied loan at your LVR, not the carded standard variable rate. The second takes a bit more work, because the sharpest pricing is often unadvertised and negotiated within a range.
The gap between your rate and the best of those two numbers is your loyalty tax.
Step four: the repricing call
Ring your lender. Ask for the retention team or the pricing team — not general enquiries, who cannot help you. Then:
"Hi — I'm calling about my home loan, account [number]. I've been with you for [X] years with no missed payments. My current rate is [X]%, my balance is around $[X], and my LVR is about [X]%.
I've been looking at the market and I can see you're advertising [X]% for a new owner-occupied loan at my LVR, and I've had an indicative offer from another lender at [X]%.
I'd prefer to stay — switching is a hassle and I've been happy with the service. But I can't justify paying [X] basis points more than a new customer for the same product. What can you do on pricing?"
Then stop talking.
Three notes on this. First, be accurate — if you don't have a competing offer, don't claim one; say you're getting one. Second, ask for the answer in writing. Third, if the first answer is a small token reduction, it's reasonable to say "that doesn't close the gap — can you escalate it?" There is usually a second tier of discretion.
Step five: know when to actually leave
Repricing is free and fast, so it should always be step one. But lenders reprice to the minimum they think will keep you, and that's frequently less than the market's best.
Switch when:
- The gap after repricing is still 0.25% or more, and your balance is large enough that it matters — roughly $400,000 and up
- Your lender won't move at all
- You want something structural they can't provide: a better offset, a different split, a change of security, cash out
Stay when:
- Your balance is modest and the fixed costs of switching eat the benefit
- The residual gap is small
- You're on a fixed rate with a break cost that swamps the saving
- You're selling within a year
We've written up the full arithmetic in what it really costs to refinance and the timing question in refinancing when rates are rising.
Why the gap widens in a rising market
Worth understanding, because it changes how often you should be doing this.
When the RBA raises the cash rate, lenders pass it to existing variable borrowers in full, on a set date, automatically. New-customer pricing is competitive and discretionary, and lenders keep discounting to win volume even while their back book reprices upward. The two don't move together.
Through 2026 the cash rate has risen four times, reaching 4.60% at the end of September. Every one of those increases hit existing borrowers on schedule. Whether your discount kept pace is a separate question, and for most people the answer is no.
The practical implication: check every six months, and always after a rate decision. Set a calendar reminder. It's the highest hourly rate you'll ever earn.
Frequently asked questions
Is the loyalty tax real?
Yes. Lenders price new lending competitively and discretionary discounts on existing loans are generally only adjusted on request. The gap between front-book and back-book pricing is well documented across the Australian market.
How much can I usually get off by just asking?
It varies with your loan size, LVR and repayment history, but reductions of 0.2% to 0.5% are common for borrowers who ask with a credible alternative in hand. Larger loans and lower LVRs get more.
Does repricing affect my credit score?
No. Asking your existing lender for a lower rate on an existing loan is not a credit application and creates no enquiry.
How often should I check my rate?
Every six months, and after any RBA decision that changes the cash rate.
Want the comparison point before you make the call? We'll tell you what your lender is offering new customers with your profile and what the market is doing — then you can ring them yourself, or we'll handle it.
This article provides general information only and does not constitute personal financial advice. Rates, costs and savings are indicative and will vary based on your individual circumstances and chosen lender.
Cumulus Capital Pty Ltd (ABN 16 695 377 229), Credit Representative Number 577081, is authorised under Australian Credit Licence Number 389328.