We all want a better rate for our mortgage. What most of us don’t want, though, is having to call the bank to negotiate or move to another bank to get a better deal.
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Banks don’t reward loyalty.
When you ask for a lower rate, you’re pretty much asking your bank to lower their profits. That’s why banks love clients that are satisfied with their mortgage loans despite rate changes just as much as their new customers. Because between an existing bank customer and one that is new to that bank, both have the same loan amount, same equity, but only the new bank client gets a much lower rate than the existing customer.
But here’s the thing—you don’t have to put up with your current rate in your bank’s favor. When it comes to getting the best mortgage rate, the key is to just shop around and not take rejection personally.
Some banks or brokers say that the final rate can only be provided after application submission—which is not wholly accurate. Indicative and exact rates can be provided, but it depends on how long it takes for you to go ahead with a pre-approval. Generally, rate offers are valid for 7-14 days, depending on the bank.
How mortgage interest rate reviews work
Banks mostly use an automated system that shows them what they can drop the rate to instantly. They provide a discount percentage over the current advertised rate, so it’s a negotiated rate for you. Different interest rate discounts apply depending on:
- your loan amount
- equity
- repayment type (principal and interest or interest only)
- product type (fixed or variable) and property use (e.g., you live there or you’re investing it)
Generally, the higher the loan amount and the higher the equity, the better your discount is. Banks are constantly juggling risk management (more equity means less risk for them if you default), capital, and funding, which essentially ends up in the bank’s interest rate at any given time. Due to different reasons, banks also focus on particular segments. E.g., a bank may be focused on first-home buyers, so they’re more likely to offer more competitive rates than others.
When comparing variable rates from different banks, understand if the product has an offset account, as this will affect the final rate.
How to lower your home loan rate, as told by a top-notch mortgage broker
- Jump online to a home loan comparison website.
Get a feel for the rates available. Make sure to compare variable loans with offset if you want one. After all, it’s sometimes cheaper to go without a balance and use redraw instead.
There are, however, potential issues when going through digital ‘neo’ cheaper banks. Their approval criteria are restricted; only available for certain suburbs, or they only allow a specific type of applicant.
- Instead of asking your bank to reward loyalty, approach another bank to find the best rate.
Get proof of that offer (ideally in writing if negotiated under advertised rates) and use that to negotiate with your bank. Generally, for big bank customers, it’s better to deal with another big bank.
- Understand how their interest rate reviews work.
Banks mostly use an automated system that shows them exactly how they can drop the rate. When getting the first counteroffer, get it escalated to a senior team, as you’re not happy with that outcome.
- Some banks will offer additional discretion if you speak with the manager.
- Call their discharge team and escalate a request.
Not happy with that offer? Escalate. The Discharge team is the last team between your bank and a new bank that you’ll be going to. Ask them for a discharge form (showing them you’re serious about moving). You don’t need to fill it.
Things to know:
- Banks’ percentage of discounts change at different times – so whilst it is a great idea to review it once every six months as an example, the time of when you do that matters. E.g., Suncorp bank just changed their discounts to increase it. This happens when fewer clients impact a bank’s profitability in the previous months or year
- Cashback and refinance change all the time
Final Thoughts
Lowering your mortgage rate is a tedious process and takes a lot of effort. If you want a painless way to get a lower home loan rate, we may be able to help you with your current bank.
If we are successful in negotiating your rate, a small, one-time fee of $150 will be charged for our time–again, ONLY IF we can get your rate to be reduced. Otherwise, if your bank is playing ball, we’ll move you somewhere else cheaper for free.
We use an automated system for our existing clients that constantly checks rates automatically throughout the year. This ensures they get the best deal when possible. Leave the hassle, time, and inconvenience to us, and let us review it for you. This comes at no cost to you as the bank pays us commissions. That doesn’t affect your rate— it’s the same rate you get through us or if you did it yourself minus the legwork. Send us a message or book a call with us today!
