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How to get a rate cut

Eden Radford avatar
Eden Radford
- 4 min read
How to get a rate cut

If you don’t ask, you don’t get - and that’s certainly the case when it comes to managing your home loan.

While RBA cash rate hikes have seen interest rates rise significantly over the last 22 months, there are steps you can take to get a cut on your home loan rate.

It may feel scary, but it’s important to remember two things:

  • Banks want to keep you as a customer
  • Asking for a rate cut works - in fact, a recent RateCity survey showed 80% of people who asked their bank for a rate cut got it.

So, read on to get the steps and even a script on how to call your bank and ask for a rate cut.

How to ask your bank for a rate cut

The 3 things you do before you pick up the phone to your lender:

  1. Check what rate you’re paying – this can be on your home loan statement.
  2. Check what your bank is offering new customers.
  3. See what other lenders are offering – arm yourself with at least two or three rates that would apply to your mortgage. You can do this by using RateCity’s database to compare thousands of home loan lenders and find what rates are on offer.

Now you’re ready to call your lender and haggle.

The 3 things you can say to get a decent cut:

  1. Mention that you are considering refinancing and list a few lenders and their rates. If you name-drop a couple of competitors, they might be more inclined to take notice.
  2. Make sure you speak with the retention team – they’re the ones with the license to hand out bigger discounts.
  3. If your lender still doesn’t budge, ask for a ‘mortgage discharge form’. That should be enough to call your bluff.

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 that I 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?”

Still no luck?

If your lender refuses to move on your rate, don’t be disheartened. Put a note in your calendar to call again in four months, or at least three times a year. If they still won’t budge after that, consider refinancing to give yourself a rate cut.

Some helpful tips for negotiation

Know your strengths as a customer

Mortgage lenders typically reserve their most competitive interest rates to ‘ideal’ borrowers. It can help to know how much of the ‘ideal’ criteria you tick to help you boost your argument for a lower interest rate when the time comes.

Being an ideal borrower may include:

  1. Having a good to excellent credit score
  2. Living in the property (versus being an investor)
  3. Reducing your loan-to-value ratio (LVR) to 80% or below (important if you applied with a deposit under 20%)
  4. Being employed in a full-time role for more than 12 months
  5. Not missing a mortgage repayment
  6. Having paid off your other debts (car loans, outstanding credit cards)
  7. Making principal and interest repayments

Research can be the ammunition you need

Research is vital, so you can know the difference between a good and bad rate quickly and easily.

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.

Compare home loans in Australia

Product database updated 19 Apr, 2024

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

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