When it comes to saving money on your mortgage, finance gurus, consumer groups and regulators have long been in furious agreement. Unquestioning loyalty to your bank rarely pays off, while haggling or leaving for a better interest rate does.

This month’s results from the big banks suggest that as interest rates have soared, more people have heard this advice and acted on it.

Customers are getting savvier when it comes to their home loans.Credit: Peter Rae

For borrowers, that’s a small silver lining amid the rapid rises in mortgage repayments. For bank shareholders, it’s unwelcome news. The apparent enthusiasm among consumers to shop around for a better home loan deal is taking a big bite out of their profits, while also raising questions about just how lucrative mortgage lending will be in the future.

After a flood of recent results, we now know Australia’s biggest banks made record combined profits of about $32 billion last financial year. This might be the last place you’d expect to find any good news for borrowers, especially when the driving force behind the results was higher interest rates.

But if you dig into the details, it’s pretty clear things are more complicated than the record profit headlines suggest, especially in retail banking (providing loans, deposits and payment services to households).

For one, it was very much a tale of two halves: the six months to September were much weaker than the six months to March, and that trajectory looks likely to continue.

More interestingly, the results confirmed a long-running trend: home loans are no longer delivering super profits for the banks, which appear to be losing their pricing power.

Why? In a word, competition. Banks have always competed in home loans, but in the past the competition focused mainly on offering a better rate to new borrowers and people switching banks, while leaving a much larger number of existing customers on higher interest rates. Critics called this phenomenon the “loyalty tax.”