Variable rate borrowers need to look outside the Big Four banks for a competitive mortgage deal: RateCity CEO Alex Parsons

Borrowers should take advantage of the low interest rate environment to ensure they have a competitive mortgage deal and to demand a discount, says RateCity.com.au chief executive Alex Parsons.

“With this week’s cut making it the seventh since November 2011, variable rate borrowers, which are the majority of the home loan market, are paying much more interest compared to the cash rate,” Parsons says.

Parsons says the gap between the benchmark standard variable rate – the average of the major four banks – and the cash rate has almost doubled (88%) over the past decade.

“The benchmark standard variable rate is currently 6.42%.

"While this is the lowest level since December 2009, it is still 3.42 percentage points above the cash rate (excluding the May 25 basis point rate cut) and the biggest spread we’ve ever seen," he says.

“Borrowers may not realise that there are over 100 other lenders outside of the major four banks in RateCity’s database, and many with more competitive deals and lower spreads than the big four banks,” Parsons says.

Parsons says borrows needs to keep a close eye on their lender, compare their home loan to other lenders and make sure they receive the discount they deserve.