Aussies Are Being Shortchanged $18b P.A. in Interest Rate Savings

This week RBA announced that it was keeping the Cash Rate on hold at 1.50%, meaning there has been no rise since November 2010. What does this mean to you?

At Lodex we want to make sure you are well informed and have all the latest data. We did some deep analysis of RBA data that revealed that 65bps worth of rate reductions have not been passed onto consumers since November 2011. What this means is that borrowers are missing out on $10 billion in savings each year.

Actually, since 2011, margins on personal loans and credit cards have actually increased by 300bps. These savings need to be passed onto consumers.

The Numbers

The Reserve Bank of Australia has begun 2018 exactly as it ended 2017: keeping the official cash rate unchanged for the 17th straight month. Unfortunately steady, record low rates have failed to translate into tangible savings for the majority of Australian borrowers – across housing loans, credit cards and personal finance.

As these savings have failed to go back to the consumer we urge all Australians to shake off their complacency and seek out a better deal on the Lodex Marketplace. It is obligation free and it does not impact your credit score. You can put your loan on the Lodex platform as many times as you like to see what lenders and brokers will offer you. Different to traditional processes where each loan would be a mark against your profile.

This is what Lodex co-founder Bill has to say:

“Since 2011, the RBA has slashed the cash rate from 4.75% to 1.50% – or 325bps – variable standard home loans rates have dropped from 7.80% to 5.20% – or only 260bps. That’s a whole 65bps that has not been passed on to consumers, across Australia’s housing market, which has a total loan exposure of $1.7 trillion (owner occupier and investor loans).”

 

Chart 1: Housing Loan Rates for Owner Occupiers vs cash rate4

“Australian borrowers are being short changed by a staggering annual sum, missing out on $10 billion in savings each year – despite the best efforts of the RBA to put the brakes on rates in an effort to boost the economy.”

For borrowers with personal loans and credit cards, the Lodex data revealed that the relevant margins for the same period increased by 300bps3. “

Chart 2: Credit Card Rates: fixed and variable vs cash rate5Mic our other co-founder also added:

“We urge Australians to actively seek out a better rate! The Lodex Marketplace was launched to put borrowers in the driver’s seat. It’s an auction-style platform where banks and brokers bid on loans, in a transparent and competitive marketplace, offering significantly lower rates.

It takes as little as five minutes, on the Lodex platform to launch an anonymous auction and test the market. Banks, lenders and brokers compete for borrowers’ business, enabling customers to secure a better deal and avoid the time-consuming legwork.

Already our customers have been offered rates as low as a 3.59% comparison rate, which is in keeping with the RBA’s reduction – that was designed to ease the strain on Aussies. Lodex is helping more people take advantage of this current low rate environment.”

RBA Data sources

Lodex Analysis of RBA interest rate data November 2011 – January 2018, the total exposure of home loans (owner occupier and investor) including securitisation based on RBA data (D2 LENDING AND CREDIT AGGREGATES – BREAKS IN SERIES) as at 31/12/2017, available here.