- Staying with a Big 4 bank could cost you $6,007 in extra interest on a $250,000 business loan over 5 years
- The average Big 4 business loan rate is 88 basis points higher than the average of the challenger banks
- The Big 4 failed to pass on the 100 basis point cut to the official cash rate in full
An analysis of business loans by financial comparison site Mozo.com.au has found staying loyal to the Big 4 banks could cost you thousands of dollars in unnecessary interest each year.
Mozo compared the average business loan rates of the Big 4 banks with the average of six challenger providers and found that sticking with a major bank could cost small business a lot more – a whole $6,007 in extra interest on a $250,000 business loan over 5 years.
“Much like residential mortgages, the Big 4 banks are giving their customers a bad deal on interest rates yet they still account for 70% of business loans issued,” says Mozo Interest Rates, Banking and Business Expert Peter Marshall.
“Our analysis has found many challenger banks have cut rates beyond the official cash rate and the gap between the average rate offered by the challenger banks and the Big 4 has increased.
“Over the past five years challenger banks cut 141 basis points on average off their business loan rates, which now average 5.19%. Over the same period of time the Big 4 mortgage secured business loan rate dropped to just 6.07%, a 57 basis point fall.
“The Big 4 banks’ failure to effectively compete on business loan rates is yet another example of how little pressure they feel,” Marshall says.
In 2014, the cash rate was 2.50% and the Big 4 had an average business loan rate of 6.64%. The six challenger banks analysed by Mozo were offering a similar rate (6.60%) on average.
“With cash rate dropping 100 basis points to 1.50% since 2014, challenger banks have taken the opportunity to make significant cuts to their to attract customers away from the domestic major banks,” says Marshall.
“The data is clear, if you want the most competitive rate on a business loan it’s time to compare what challenger banks are offering and bank a better rate.”