Five steps to negotiating a better home loan rate

Home owners could save tens of thousands of dollars by asking their bank for a rate cut or switching to another lender, particularly if they switch to a lender with a fee-free product.

A staggering 75 per cent of Australian mortgage holders have their home loans with the big four banks – CBA, Westpac, ANZ and NAB.

Over the last six months we’ve seen every major bank hike rates out-of-cycle, with the exception of NAB, which begs the question, is your big bank delivering you value for money?

Many Australians don’t like the idea of refinancing to another lender, but what a lot of people don’t know is that you can actually haggle with your existing bank to try and secure a rate cut, even as an existing borrower.

First of all, do your research. Find out what other lenders are offering new customers. It’s always worth calling a few up to make sure the loan you are looking at is a good fit for your needs and get more details about the benefits of the loan.

Then, call your bank. Present them with the evidence and see if they’re willing to negotiate with their loyal customer (that’s you).

If they aren’t, then you’ve already started the research to switch.

While switching can involve a bit of paperwork, the financial benefits will often stack up in your favour, particularly if you move to a low rate, low fee lender.

If you are on a ‘discounted’ package rate with a big bank, you’re probably paying an annual fee of $395. Switching to a fee-free lender can help you save significantly more. Switching to a low rate, fee free lender is likely to be even better for your finances.

Impact of a 0.50 per cent rate discount

Impact of a 0.20 per cent rate discount

Impact of a 0.10 per cent rate discount

Notes: Rates are based on the major banks package rates as recorded by the RBA statistics Sept 2018 of 4.55% for an owner occupier paying principal and interest. Calculations are based on someone switching five years in to a 30 year-loan. Major banks package fees are estimated at $395 / yr based on an average of the big four package fees. Discharge fees included.

Steps to negotiating a better home loan rate

If you believe you’re paying too much with your mortgage repayments (let’s be honest, most probably are), it’s important to remember the best way to arm yourself for a negotiation is with information.

There are a few simple steps you can follow to negotiate a better rate with your bank. 

1. Look at the competition – Utilise RateCity’s comparison tools to search and compare lower mortgage rates on the market. You’ll be amazed at what rates are available. 
2. Find out your bank’s new customer rate – Banks often offer new customers lower rates that their loyal ones. If your bank is charging you more, ask them to match the lower rate.
3. Speak to the right people – When you call up, ask to speak to a customer retention specialist. It’s their job to keep you happy (and on the books).
4. Remember the three magic words: mortgage discharge form – You’d be surprised how quickly a lender is willing to lower your mortgage rates if you ask them for a discharge or refinance security form.
5. Be prepared to leave – If your bank won’t budge, maybe you should. Reach out to one of the lower rate lenders you’ve found through your search and consider refinancing. 

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