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Asking for a rate cut: how to negotiate a better home loan rate

Alex Ritchie avatar
Alex Ritchie
- 7 min read
Asking for a rate cut: how to negotiate a better home loan rate

They say that if you don’t ask, you won’t receive The same can be said for securing a lower rate home loan. 

Interest rates on mortgages have been rising at an alarming frequency for millions of homeowners in Australia. However, there are tangible steps you can take to get back control of your home loan debt and reduce the pressure on your household budget.

If your household budget is starting to feel the financial pinch from rising mortgage repayments, it may be worth considering negotiating for a lower rate.

It may feel intimidating for some homeowners, but you’d be shocked at just how easy it is to talk your way to a lower home loan rate - if you have the right ammunition and script to follow.

It may be as easy as picking up the phone and asking.

  • Your lender makes money off your complacency. It’s referred to as the ‘mortgage loyalty tax’.
  • Your lender will typically offer lower rates to new customers to entice them to apply. Pick up the phone and ask your lender to match this rate.
  • Other lenders may be offering lower rate mortgages. Make a list of these loans, pick up the phone and request your interest rate be lowered.
  • If the lender still won’t budge, consider refinancing to give yourself a rate cut.

How to ask your bank to lower your home loan rate

Step 1: Know your strengths as a customer

Home loan lenders typically reserve their most competitive interest rates to ‘ideal’ borrowers. That’s not to say you still can’t negotiate a lower rate if you don’t meet these criteria, but it’s worth knowing how many you tick. These factors may help you to boost your argument for a lower interest rate when the time comes.

Before you begin the negotiations, you may want to take some time to assess your financial situation, and see how many of the following you match:

Being an ideal borrower may include:

When you applied for your home loan, you likely did not meet all of these criteria - especially if you were a younger Australian. After a few years of repaying your mortgage, you may now be in a more competitive financial position, meaning you may be more likely to nab a lower interest rate. 

Keep in mind that if you already met this criteria when you applied, you may already be paying your lender’s lower home loan rate offering. In that case, you may want to instead consider refinancing as opposed to negotiating.

Step 2: Research your lender’s new customer rates

Your next step will be to hop online to your lender's website or use RateCity’s search tool, to find what rates your lender is currently offering new customers.

  • Unsure of your current interest rate? It should appear on your home loan statement, through your online banking platform or banking app.

Generally speaking, a home loan lender will reserve its most competitive rates for new customers to entice them to sign up. If you’ve been with your lender for a few years, you may be paying a higher rate than those offered to new customers.

This may be especially relevant for borrowers previously on fixed rate terms that have reverted to a lender’s standard variable rate. The standard variable rate can be a lot higher on average.

You can then use this knowledge as part of your negotiation when you speak to your lender and request a rate reduction. After all, why should you pay a higher rate as a loyal customer?

Unloan (a division of CBA)
Variable Rate Home Loan LVR < 80%
  • Owner Occupied
  • Variable
  • 20% min deposit

Receive an extra 0.01% p.a. discount every year, up to a maximum discount of 0.30% p.a.

Built by CBA, this home loan deal allows borrowers who refinance benefit from an ongoing loyalty discount

Interest rate p.a.


Comparison rate* p.a.


More detailsclick for more details

Step 3: Research competitor interest rates

Sometimes your lender can be resistant to lowering your mortgage rate to meet new customer offerings, so it is also worth researching lower rate home loan options from competitors.

Hop on to RateCity’s comparison table and enter your current loan details in the filter, such as your loan amount, property value and whether you’re paying principal and interest or interest only. You’ll then be shown a list of home loans available on the RateCity database that may be compatible with your mortgage. 

Take a screenshot of these lower rate options, or write down this list, and use it as backup for your negotiation.

After all, if your bank won’t reduce your rate because new customers are paying less, then mentioning their competitors is a great way to get their attention. Plus, if they still refuse to change your rate at the end of the day, you now have a list of potential options to consider refinancing to.

Step 4: Begin negotiations

You have all your ammunition, including:

  • Why you are an ideal customer
  • How much more you’re paying as a loyal customer versus new customers
  • How much less competitors are charging

Now is the time to pick up the phone and call your lender. Whichever team you are directed to, be firm (but polite) that you would like to request a home loan rate decrease. 

Then, begin listing the above information. If they won’t budge after you mention new customer rates, bring in your big list of lower rates offered by competitors.

If your provider still won’t budge, it’s time to mention the three magic words: mortgage discharge form. Let your lender know that you are serious about getting a lower interest rate and that you are prepared to switch lenders if they won’t play ball. 

The bottom line

Banks and lenders often need you a lot more than you need them. They are literally banking on you never speaking up to request a rate decrease. 

In fact, this is often referred to as a “mortgage loyalty tax”, and even the Reserve Bank of Australia has recommended that you shop around for better home loan options. If your lender wants to retain you as a customer, it should be able to cut your interest rate.


Your script for asking for a lower home loan rate

“Hello, my name is [Your Name] and I’d like to speak with a customer service representative about my home loan interest rate. I have been a home loan customer for X years and would like to request an interest rate reduction.”

“I’ve seen that you are currently offering new customers an interest rate of X.XX%, and this is XX% more than I am paying. I do not think it is fair thatI am paying so much more as a loyal customer.”

“I have proven myself to be an ideal customer because I have never missed a mortgage repayment and have reduced my LVR to XX% over the years [insert your reasons]”.

If they won’t budge

“I’ve done some research online and saw that your competitor [Lender Name] is currently offering refinancers, like me, an interest rate of X.XX%. If you will not reduce my rate, I am prepared to switch to this lender.”

If they still won’t budge…

“I’d like to request a mortgage discharge form then to begin the process of refinancing. If you won’t take care of a loyal customer like me, why should I keep my home loan with you?”

The cost of refinancing

You will need to be certain that you are comfortable refinancing if it does come down to it. Hopefully your lender will budge on your rate before you need to pull the trigger, but if you have to switch lenders, you should now have a list of potential lower rate options to consider.

That being said, be aware that switching home loans can be a costly exercise, so make sure you find out all the fees and charges involved to exit from your existing loan as well as setting up the new one.

Also ensure that if you refinance, you don’t end up extending your loan term as this can result in paying tens of thousands of dollars more in interest.

Use our Refinance Calculator now to see how much more you may save by refinancing to one of the competitive home loans from your research.

Compare home loans in Australia

Product database updated 22 Jun, 2024

This article was reviewed by Personal Finance Editor Peter Terlato before it was published as part of RateCity's Fact Check process.