Two-thirds of mortgage holders in Australia are complacent when it comes to approaching their lender for a cheaper home loan, new research by finder.com.au, Australia’s most visited comparison website, shows.
The national survey of 2,033 participants found 65% of Australian home loan customers have never asked for a better interest rate – but for those who did, it has certainly paid off.
Bessie Hassan, Money Expert at finder.com.au, says a staggering four out of five mortgage owners (82%) 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.
Ms Hassan says 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 are 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.
A small reduction in a home loan rate could result in thousands of dollars saved.
Based on the current average national home loan size of $360,100, a 0.10% reduction from the average standard variable rate of 4.93% to 4.83% could save you approximately $262 per year or $7,870.79 over 30 years.
“A 0.25% discount off the standard variable rate to 4.68% could pocket you $653 per year, or $19,594.87 over the life of your loan. Simply put, the savings are extensive.”
The survey found almost one in five borrowers (18%) had switched to a new lender for a cheaper mortgage rate or a more suitable home 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.
“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.
- Generation Y were least complacent – with 44% approaching their bank for a cheaper rate (68% successful).
- Only 8% of Baby Boomers were knocked back when they asked for a better rate.
- Almost one in ten (9%) Generation X had switched to a new lender their current lender wouldn’t offer them a better rate.
- While more men (38%) apply for an interest rate cut with their banks than women (33%), women are more successful at getting a cheaper rate.
- More than half of women (51%) had not negotiated a lower interest rate on their home loan compared to 41% of men.
- A greater proportion of men (21%) refinanced than women (16%).
State by state
- Over one in ten (91%) Queenslanders who asked for a discount were successful in getting one.
- Tasmanians had the highest success rate at 95%.
- South Australians are the most likely to have applied for a discount or switched lenders (57%).
- NSW residents were the least successful at getting a discount with only 73% succeeding.
- ACT borrowers were most complacent – with 58% not bothering to negotiate a lower interest rate on a home loan.
Negotiating a discount on your mortgage
- 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.
Also published on Medium.