You’ve got to haggle for best home loan deals
Mortgage holders in Australia are being far too complacent when it comes to approaching their lender for a cheaper home loan, new research by comparison website Finder.com.au shows.
The national survey of 2033 participants found 65 per cent of Australian home loan customers have never asked for a better interest rate – but for those who did, it has certainly paid off.
Finder.com.au money expert Bessie Hassan says a staggering four out of five mortgage owners (82 per cent) received a better deal upon requesting one.
“Something as simple as asking for a cheaper rate is delivering thousands of dollars in savings for Australian home loan customers”, she says, adding that it’s crucial to take steps to get the best home loan deal.
“Haggling doesn’t come naturally to a lot of people but when there are big dollars at stake, it’s worth stepping out of your comfort zone and asking your lender to do better,” she says.
“Mortgage repayments are the single biggest monthly expense for most households and those saved dollars are much better off in your back pocket.
“Although we’re in a historically low rate market, it’s vital that mortgage holders regularly review their loans and approach their bank, using loyalty, loan size or market competitiveness as leverage.”
Small reductions in home loan rates can result in thousands of dollars saved. Based on the current average national home loan size of $360,100, a 0.10 per cent reduction from the average standard variable rate of 4.93 per cent to 4.83 per cent could save you approximately $262 per year or $7870.79 over 30 years.
“A 0.25 per cent discount off the standard variable rate to 4.68 per cent could pocket you $653 per year, or $19,594.87 over the life of your loan,” Hassan says.
“Simply put, the savings are extensive.”
The survey found 18 per cent of borrowers had switched to a new lender for a cheaper mortgage rate or more suitable loan.
“As well asking your lender for a discount, factor in their overall offering, including fees, features, flexibility and customer service.
“Frankly, if you’re not impressed with what your lender is offering you, weigh up your options and consider making the switch for a better deal,” Hassan advises.
“While borrowers can negotiate discounts on both fixed and variable loans, keep in mind that once a fixed rate has been secured this rate applies for the entirety of the fixed term. If you choose to exit the loan during this period, a hefty break fee will usually apply,” she says.
The generations
Generation Y were least complacent – with 44 per cent approaching their bank for a cheaper rate (and 68 per cent were successful).
Only eight per cent of baby boomers were knocked back when they asked for a better rate.
The sexes
While more men (38 per cent) apply for an interest rate cut with their banks than women (33 per cent), women are more successful at getting a cheaper rate.
Fifty-one per cent of women had not negotiated a lower interest rate on their home loan compared to 41 per cent of men.
State by state
More than one in 10 Queenslanders who asked for a discount were successful in getting one, while Tasmanians had the highest success rate at 95 per cent.
South Australians are the most likely to have applied for a discount or switched lenders (57 per cent).
NSW residents were the least successful at getting a discount, with only 73 per cent succeeding.
ACT borrowers were most complacent, with 58 per cent not bothering to negotiate.
TOP TIPS
Identify your rate. Review your home loan statement to check your existing interest rate. Once you’ve got this, determine whether or not your rate is competitive by comparing other home loans available on the market. You should also visit your lender’s website to see what they’re offering new customers – it will most likely be lower than the rate they’re offering you, so you can use this as leverage during your negotiations.
Build a case. To show why you deserve a better home loan rate, you need to retrieve your account information. How long have you been a customer with the bank? Have you made your repayments on time? Do you have any other products with the bank? Lenders are more inclined to give you a rate discount if you can prove your good track record.
Shop around. Do some online research and contact other lenders to see what they can offer you. When comparing home loans, make sure you look at the comparison rate as well as loan fees such as the establishment fee and any ongoing fees.
Approach your lender. Once you’ve done your background research, contact your lender and negotiate a better deal. Explain why you deserve a better rate and notify them that you’ve found more competitive deals on the market. If the lender agrees to issue a rate discount, the new rate should come into effect immediately so you could be reaping savings on your next monthly repayment.
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