While fixed rates have been going up for months, variable rates are still going down, but mostly for new customers – unless you know what to ask for.
So now is the best time to haggle and get a discount that will last for the duration of your loan.
The country’s largest property lender, the Commonwealth Bank, has acknowledged that the competition is intense.
“We’ve seen increasing levels of competitive intensity in the marketplace, not just in housing but in a number of different areas,” CEO Matt Comyn told 9News.
“We believe the intense competition will continue, which of course is great news for customers.”
How to get a better rate ?
RateCity research director Sally Tindall said now is the time to prepare for a rate hike by looking for a rate cut.
“Banks don’t want to lose your business, if they think you might leave they’ll probably give you a decent discount,” she said.
“Just make sure you do your research first.
“Arm yourself with a good argument and some facts and you’ll be in a good position to negotiate.”
Check the rate you’re paying: Log into your banking app or call your bank and ask.
Check what your bank offers new customers by visiting their website.
Check a comparison site to see what other lenders are offering – arm yourself with at least two or three rates that would apply to your mortgage.
Call your bank and haggle – here’s what you can say and do:
Tell your bank how much more interest you pay than they offer new customers and ask for a discount
If they don’t budge, ask to speak to the retention team and mention some of the lenders you’ve found that offer better rates
Then it’s time to play some hardball – ask them for a mortgage release form. That’s probably enough to call their bluff
At this point, you might have your bank on its knees begging you to stay, but if you’re still not happy with the rate, well you’re halfway there to remortgage anyway, you might as well go all the way and get yourself a decent rate reduction
New customers pay less than existing customers
If you’ve had your home loan for a few years, chances are you’ll have a higher interest rate than someone who recently refinanced.
The RBA tracks the interest rates that existing customers pay relative to new customers.
|Existing customer||new customer||Difference||One year interest|
Source: RBA Lending Indicators, RateCity.com.au. Rates are taken from the December RBA, released on February 9. Calculations assume a loan of $750,000, principal and interest over 25 years.
Haggle and save thousands
For anyone with a variable rate, an easy way forward is to call your bank and ask for a rate drop.
Even if you only reduce your interest rate by 0.25% and have $750,000 to pay on your loan, you could save $1,860 in interest in the first year.
This assumes you are a homeowner with 25 years to your loan and are currently on the RBA existing customer rate of 2.96%.
If you get a 0.50% reduction on your interest rate in the same scenario, you could save $3,719 in interest in the first year.
|Interest after one year||Difference|
The advantage of haggling a rate reduction is that the reduction you receive should last for the duration of your loan.
This means that when rates go up, your discount will help keep your rate lower than it otherwise would have been.
|Interest after 25 years||Difference|
Source: RateCity.com.au. Assumes owner occupier pays principal and interest over 25 years. This scenario is based on the RBA’s current average existing variable client rate of 2.96%. Does not take rate increases into account.
Rates could rise in August
The RBA has now acknowledged what economists had predicted – that rates could start to rise in August.
Mr. Comyn said that over the past two or three months there have been a number of fixed rate increases.
“So there’s been a lot of shift to fixed rate mortgages as customers have been thinking about rising interest rates,” he said.
“And so I think we’re going to continue to see some pretty sharp offers and competition on standard variable rates as well as fixed rates.”
Macquarie Fields nursery nurse Ronika Chand was getting nervous with all the talk of rising interest rates.
She was paying a whopping 4.04% on a variable rate and to her and her husband’s relief, recently refinanced at 2.54%.
“Knowing that we have this lower rate has eased the stress for me and my family,” Ms Chand said.