Don't compare against the so-called 'standard variable rate'
Don't allow any lender, bank or non-bank, to tell you you're getting a good interest rate because it's lower than the banks' standard variable rate (SVR). The SVR of the major banks has ceased to become a meaningful yardstick. Its not the typical rate paid by Australian borrowers, far from it. We estimate that at any one time less than 10 per cent of borrowers are paying the prevailing bank standard variable rate. Infochoice analysis shows the true benchmark variable rate is 0.5 per cent lower than the bank SVR. It's not just that the plethora of non-bank lenders undercut the banks. Even the banks themselves hardly ever lend at that rate. Anyone borrowing more than $250,000 will be offered a professional package of discounts which cuts the SVR by 0.5 to 0.7 per cent for the life of the loan. The SVR minus 0.5 per cent, that's your market average for comparing loans when shopping around.
