Banks favour borrowers with bigger mortgages, spokesgroup claims

by AB11 Jun 2013

Borrowers who take on a bigger mortgage are being offered cheaper home loans, while many smaller borrowers are forced to pay higher interest rates, claims an investigation by financial comparison website RateCity.

‘Affluent customers’, which the site defines as borrowers who can afford a mortgage worth more than $750,000, receive an average variable home loan rate of 5.32%, out of more than 100 lenders in RateCity's database. This is 0.42 percentage points lower than the average variable home loan rate for loans below $250,000.

According to the investigation, the major four banks  also offer cheaper deals for bigger mortgages. CBA has the biggest spread, with 0.35 percentage points lower advertised variable rates for a home loan above $750,000 compared to a home loan below $250,000.

When Australian Broker contacted CBA regarding the claims, a spokesperson stated that they 'never offer comment on third party research'.

Michelle Hutchison, spokesperson for RateCity, says lenders have a greater financial gain from borrowers taking on more debt.

"It comes down to the fact that bigger home loans are worth more money to lenders so they will make larger loan sizes more attractive by offering cheaper rates. Just as if you were to visit a supermarket to buy a bottle of soft drink, the bigger the bottle you purchase the less you pay per litre. In much the same way, a lender is willing to accept a lower rate per dollar when selling a larger amount of money.”

"But just like a bottle of soft drink,” says Hutchison, “bigger isn't always better when it comes to borrowing."


  • by Carcass 11/06/2013 10:00:10 AM

    What is strange about this article is that it is being classed as "news". There is nothing new about the banks offering larger discounts to bigger loans. This is just someone trying to get their name in the media.

  • by Country Broker 11/06/2013 10:05:25 AM

    This has always been the same except for some of the majors nothing new in this , its the market .

  • by Mike Clarke 11/06/2013 10:36:29 AM

    Definately not new information but an important point to therefore stress is that for borrowers with smaller borrowing needs, make sure we as brokers explain this & show the benefits of some of the so called 2nd tier lender's basic products. There really is some great options out there for these borrowers as far as reduced interest / fee costs & still with some good 'bells & whistles'.