Whether you’re looking to buy, build, invest or refinance, right now Australians have access to some of the lowest home loan interest rates on record.
After the RBA cut the cash rate to an historical low of just 0.75% on Tuesday, home loan rates have dropped as low as 2.69%.
Since June this year, the cash rate has been cut by 75 base percentage points. Two 25 base percentage point cuts in a row in June and July, and another 25 base percentage points this week.
The bad news is that many of the big banks are not passing on the full rate cut, opting instead to cut somewhere between ten and sixteen base percentage points.
The good news is that the banking giants are in a highly competitive home loan market, and if they haven’t passed on the rate cuts in full, you can still negotiate.
In order to negotiate a lower rate on your home loan, you may want to try one of the following four tactics:
#1 Shop around and find the lowest rates on offer
Before you contact your bank to negotiate a lower rate, make sure you shop around and compare home loan rates. You can access the latest rate changes after the RBA cut via the RateCity Rate Tracker.
Peer to peer lenders, neo banks and non-bank lenders can often have much lower rates than larger financial institutions, so compiling a list of loans similar to yours is very useful.
If, for example, you are able to find multiple lenders offering much lower rates than you are currently receiving, you can use this data a bargaining chip to secure a lower rate.
This type of independent financial research will increase your financial awareness and potentially open your eyes to better deals that could save you thousands of dollars over your loan term.
#2 Ask for the same rate as a new customer
Lenders will often provide low rates and discounted offers in promotions to attract new customers.
If you think that your current mortgage rate is too high, try calling your bank and finding out what rates they’re offering to new customers. If you hear a much lower interest rate than the one you are currently paying, don’t be afraid to ask your bank whether they can match the new customer offer on your loan.
In order to improve your chances of getting that lower rate, it may help to gather the following information to prove you’re a loyal customer and reliable debtor:
- Proof you have never missed a payment over the length of your loan
- Your current credit rating from both Experian and Equifax, if it’s high or excellent
- Proof you also make repayments on time for other credit cards or personal loans you hold with the same bank
- Details of competitor’s rates for the same loan product that have much lower rates than the new rate you are asking for.
#3 Ask your bank for a discharge form
If your bank decides they cannot meet your request to match a lower rate, you may wish to challenge your lender by requesting a discharge form.
You don’t need to complete the form, but by asking you show you’re serious about moving your business to a lender with a more competitive rate.
If, after requesting the discharge form, they are still not budging on the rates they offer new customers, you have a right to look at other non-bank lenders.
This is especially true if you’re a loyal customer who has paid a 5 per cent interest rate on your home loan for the past ten years, when competitor rates are now starting as low as 2.69%.
#4 Speak to a mortgage broker
If you’re unable to negotiate your home loan rate by following the steps above, the next step is to speak to a financial advisor or a mortgage broker.
As the financial industry can be complicated, with various caveats, terms and conditions, a broker’s expertise could be the ticket to locking in a lower rate.
Refinancing is something that many debtors don’t look into, as it seems like a hassle, but refinancing to another lender with a rate that is 0.5 base percentage points lower than your current rate could save you thousands of dollars over your loan term.
Non-bank lenders give the big four a run for their money
New non-bank lenders like Athena and Reduce are currently offering some of the lowest rates and fees. Plus, you may find a lender offering outstanding customer service in a time when trust in financial advice is low. If you can’t get the rate you want with your current big bank, why not consider making a switch?
With the cash rate at a record low of 0.75 per cent, and non-bank lenders offering rates from 2.69%, there’s never been a better time to see how much you could save if you refinance.
Keep up to date with the latest rate changes with our RateCity Rate Tracker.