The gap
Nothing about your loan changed. New business got priced sharply to win it and your rate stayed where it was. The gap is smaller than most people claim and larger than most borrowers realise, and it grows with every year nobody looks.
The size of it
Start with the caveat that most pages selling a refinance leave out. On the aggregate, the loyalty tax right now is small: RBA figures for May 2026 put the average rate on outstanding owner occupier loans and the average rate on new owner occupier loans within 2 basis points of each other.1 If someone tells you every existing borrower is being fleeced this month, the national numbers do not support it.
The aggregate hides the thing that matters, which is loan age. The ACCC's Home Loan Price Inquiry found that borrowers with home loans more than ten years old were paying on average about 104 basis points more than the average rate on new loans, and that loans three to five years old paid about 58 basis points more.2 The same inquiry put a dollar figure on it: a $250,000 loan aged three to five years could save more than $1,400 in interest in the first year, and more than $17,000 over the remaining term, by moving to the average new loan rate.2
So the honest version is narrower than the headline and more useful. The tax is not charged to everyone equally. It accumulates with the age of the loan, which means the question is not whether lenders do this, it is how long it has been since anyone looked at yours.
1 Reserve Bank of Australia, Statistical Table F6, data to 31 May 2026, retrieved 26 July 2026.
2 ACCC, Home Loan Price Inquiry, 5 December 2020.
The mechanism
No one decides to raise your rate. The gap opens because two prices move independently: the rate offered to win new business, which is competitive and keenly watched, and the rate on loans already written, which is not. Over time the first falls relative to the second and the difference is simply left there.
The ACCC examined this in its Home Loan Price Inquiry and found borrowers were missing out on significant savings by not switching.2 The finding has been repeated often enough since that it is no longer controversial. What has not changed is who bears the cost of noticing, which is you.
Because the incentives are stable. Winning a borrower costs a lender real money in discounts and commissions, so front book pricing is aggressive. Keeping a borrower who has not asked anything costs nothing at all. Meanwhile switching feels like paperwork, the saving is invisible unless you go looking, and nothing in your statement flags it. Every part of that arrangement works in the lender's favour, and none of it is a scandal. It is just the default.
2 ACCC, Home Loan Price Inquiry, 5 December 2020.
What closes it
Research has repeatedly found large numbers of Australian borrowers missing out on mortgage savings they could access.3 The remedy is usually not refinancing. It is asking.
The awkward part is that this works and then stops working. A rate matched today drifts again, because the mechanism that opened the gap the first time is still running. Closing it once is a good afternoon's work. Keeping it closed is a standing appointment, which is what a monthly home loan health check is for.
3 Finder, research on missed mortgage savings, 30 June 2026.
Questions
It is the gap between what existing borrowers pay and what the same lender offers new customers. Nothing about your loan changes. The important detail is that it is not charged evenly: ACCC analysis found the gap grows with loan age, reaching about 104 basis points on loans more than ten years old while newer loans sat much closer to market.
Because it works. Acquiring a new borrower costs money in discounts and broker commissions, so lenders compete hard at the front door. Retaining an existing borrower who is not asking questions costs nothing. The gap is the price of your inattention, and it widens quietly rather than through any single decision.
Find your current rate on a recent statement, then look at what your own lender advertises today for a new owner occupier loan at your loan to value ratio. If the advertised rate is meaningfully lower than yours, that difference is the loyalty tax and you can ask them to close it.
No. Asking your existing lender to reprice your loan is not a credit application and involves no credit enquiry. Refinancing to a different lender does involve an application, which is recorded. The free first step of simply asking your current lender carries no downside at all.
At least once a year, and after any RBA move or any change to your loan to value ratio. The gap does not open in one moment, it accumulates, so a loan left alone for four years is usually further off market than one checked last winter. Checking costs nothing but the time.
Sources
Market figures are point in time published figures, checked each time this page is reviewed.
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