HOME LOANS

News, info and tips to help you save smarter

Save $100K by switching home loans

About this post

If given a chance to get a better rate, eight out of 10 Australians say they would consider switching banks for their home loans, so why don't more of us do it?

For Jason and Karen Rout of Sydney's Western Suburbs, and their two young children, switching to another lender had never crossed their minds. The pair has a $320,000 home loan repaid at a rate of 6.67 percent.

"We hadn't thought about it," Karen said.

Damian Smith, chief executive of RateCity, said switching a home loan isn't trivial, but it is easier and cheaper than some players want you to believe.

"A home loan is a big deal and too many of us don't look at it until it's too late," he said.

"You've actually got people who are hungry for your business."

Mitchell Watson, analyst at financial research firm Canstar, says competition has never been so fierce in the home loans market.

"There're over 115 lenders in the market, so who do you choose?" he said.

"If you are paying 7 percent or more on your home loan you are paying too much."

Twenty years ago, 22 percent of all home loans settled were refinanced loans – in other words people switching to a new mortgage. A decade ago it was about the same at 23 percent, then five years ago it jumped; 30 percent of all loans signed were refinanced. Today, it's over one-third.

"The hard part was contacting [the lenders]; they all had different lingo, some of them were rude, some I just didn't understand what they were saying," Karen said.

After narrowing down their choices, Karen and Jason spoke with three small lenders. After two weeks, the Routs moved their home loan from one of the big four lenders, where they paid 6.67 percent to online lender loans.com.au with a rate of 6.4 percent. They also reduced the term of their new loan to just over 20 years, rather than 30 years. As a result the long term savings are more than $100,000.

"Definitely give it a try. It's worth the time and effort; so get on the computer and give it a try," said Jason.

Shopping around and comparing home loans is not just a way to get ready to move to a new lender, though, according to Smith. It's also a way of negotiating with your current lender.

"We consistently hear from contacts in the industry that within big four banks, managers often have discretion to substantially reduce the rate you're paying if it's clear you are ready to walk as a customer," he said.

"That can only be a real threat (and not an idle one) if you've already compared offers and negotiated with other lenders."

This is an information service. By browsing on the website and/or using our search tools, you are asking RateCity to provide you with information about products from multiple financial institutions. We will try to show you a range of products in response to your request for information. The search results do not include all providers and may not compare all features relevant to you, for further details refer to our FSCG. The rating shown is only one factor to take into account when considering these products. See the rating methodology. We not a credit provider, and in giving you product information we are not making any suggestion or recommendation to you about a particular credit product. If you decide to apply for a product, you will deal directly with a financial institution, and not with RateCity. Rates and product information should be confirmed with the relevant financial institution, and you should review the PDS before you decide to purchase. See our terms of use for further details. This advice is general and has not taken into account your objectives, financial situation or needs. Consider whether this advice is right for you.