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$4,740 cheaper mortgage? It’s now up to you

Jessica Yun
·4-min read
Australian currency house real estate price mortgage concept
Australian currency house real estate price mortgage concept

When the Reserve Bank cut rates to 0.1 per cent this Tuesday, home owners were hopeful it would mean paying less on their home loan.

But days have passed, and all of the Big Four banks have only passed the cut onto fixed rate home loans.

It means major bank customers with variable home loans are paying the same amount in repayments they were paying before Tuesday.

Treasurer Josh Frydenberg on Tuesday said he expected major banks to pass the cut on.

"Pass it on to small businesses and pass it on to mortgage holders,” he said.

Has anyone lowered variable rates at all?

Smaller banks and lenders have. Athena Home Loans announced the full 0.15 per cent cut right after the RBA’s announcement,

ME Bank today announced it would pass on the full 0.15 per cent cut, effective 26 November.

“For an owner occupier borrower paying principal and interest repayments on a 25-year $400,000 home loan, this rate cut by ME could put $406 back into their pocket annually,” said ME Bank CEO Adam Crane.

Homeloans.com.au, Homestar, Mortgage House, and the Australian Military Bank have also passed on a 15 basis point cut.

Pacific Mortgage Group has passed on a 0.1 per cent cut.

Meanwhile, Freedomlend, Reduce Home Loans and Aussie Home Loans have actually slashed variable home loans by 20 basis points.

I’m with a big bank. Is there anything I can do?

Though the banks haven’t passed on the rate cut to variable customers, there are still steps you can take.

In such a low rate environment, and with wallets tightening, Aussies are on the hunt for better deals. One in three – or nearly a million Australians – are intending to refinance their mortgage in the next twelve months, according to fresh Finder data.

So that’s why now is a great time to haggle with your lender, says RateCity research director Sally Tindall.

“The refinancing boom has the banks spooked. The last thing they want to lose you as a customer, particularly if you have a good track record of paying down your debt,” she told Yahoo Finance.

Asking for a better deal could save you $395 a month or $4,740 a year.

“If you’re in a position to refinance, you can play hard ball, because they know you can take your mortgage walking. There are rates out there as low as 1.77 per cent.”

Aussies who have a stable income, have built up some “decent equity” should know they’re in the driver’s seat when it comes to their home loan rate, Mozo money expert Kirsty Lamont told Yahoo Finance.

“You’re the type of borrower lenders want to keep in their books. So that gives you bargaining power.” Use that to your advantage, she urged.

“Your lender should be doing everything they can to keep you as a quality customer.” If your lender won’t budge, walk away – you’ll find a better deal. Smaller lenders often have much better deals on offer than the big banks, she added.

“If your lender won't come to the party, what you need to know is there are many other lenders who will welcome you with open arms, with discounted interest rates and all sorts of other incentives from reduced application fees to home loan cashbacks.”

How to negotiate with your lender

Canstar financial services executive Steve Mickenbecker said there were three main tips to negotiating a lower home loan rate:

  1. Do your research and come prepared

“Having a clear understanding of the lowest rates in the market and who is offering them improves your bargaining position and increases your chance of receiving a more competitive rate from your current lender or a prospective one.”

  1. Make the call – but know what you’re asking for and why

“Point out specific examples of where you have seen lower home loan interest rates advertised or better deals for new customers," Mickenbecker said.

Your lender might offer you a small discount, thinking you won’t want to go through the hassle of refinancing, but make it clear you’re ready to call them on their bluff. And don’t take up their first offer, Mickenbecker added.

“If you’ve done your homework you will be able to judge whether it is a good enough deal.” Once you’ve settled on an interest rate you’re happy with, get the approval and confirmation of the new rate and fees in writing via email.

  1. If all else fails, switch

Still not happy? It’s time to walk. “Applications can usually be done online… Switching lenders is not the hassle it once was,” he said.

But don’t just switch “once in a lifetime” and assume your deal will remain competitive.

“Periodically jump online to see what rates are currently on offer and how yours stacks up.”

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