Do you know how to get a
better deal on your mortgage?
With interest rates at record lows
and lots of competition between lenders,
it's a great time to be negotiating.
- In a year alone, I'm going to save
hundreds of dollars on my mortgage.
And, of course, that's going to add up each year
and it could end up being
thousands of dollars quite quickly.
It took about two minutes on the phone.
It was a very easy conversation
and the bank was more than happy that I had called.
In fact, they thanked me for giving them
the opportunity to keep my business.
- A simple way to check if you're getting a competitive rate
is to see what your lender is offering to new borrowers.
A recent report by the
Australian Competition and Consumer Commission found:
So if your home is more than a couple of years old
there's a good chance you're not getting a great deal.
The ACCC found:
It might sound like a small difference, but it's not.
On a $250,000 loan, it works out to be an extra
$1400 interest in the first year alone.
Over the whole loan, the difference is more than $17,000.
Often you don't need to switch.
You can just ask your lender for a better rate.
But to get the best outcome,
it helps if you've done your research.
- Because often when you call up
and try and negotiate a better deal, they'll say,
well, what have you seen elsewhere from the competition?
And they sort of use it as a bit of a way to price match.
So doing your research online is very important.
Having a look at comparison sites
or just looking at the major lenders
and see what they're offering.
What we saw recently was that the online lenders
came through and passed on some of the cuts,
whereas some of the traditional lenders didn't.
So, keep your scope wide
when you're looking at the competition.
And also make sure you're looking at
something called the comparison rate
because not all interest rates are the same.
And if you look at the comparison rate
that includes not only the interest rate
but also other fees and charges.
It's really important to psych yourself up
to have these sorts of conversations.
Some people can get a little bit nervous
but I always just think,
you know, can I afford not to make the call?
Because this could potentially save me a lot of money.
And so just making sure I'd done my research,
I felt really comfortable with what I was going to say
and that I felt sort of prepared to switch banks if I needed to;
if I wasn't offered a better deal.
- If you're not comfortable asking on the phone,
you can try emailing your lender
or even using their live chat option if they have one.
- Essentially, I just said, look,
I've seen that the RBA has cut rates
and I just was hoping that you could
offer me a better deal on my current mortgage.
And so the woman asked me
what other lenders I'd seen around?
And I was able to quote a couple of lenders
including one online lender.
And she came back with an offer of 2.87%.
So that was down from the current 3% that I was paying.
And I just sort of thought that's pretty good
but why not just be a bit cheeky
and ask could they do any better?
She did go away again and came back
and offered me a further
10 basis point reduction.
So that was 2.77% all up.
And I was really happy
with that reduction.
That seemed quite fair to me.
A lot of people have followed this script
and called their banks and have had big successes,
you know, up to 1% discount.
And, of course, it all depends on your situation,
your relationship with the bank, how big your loan is.
There's a whole lot of factors.
So if your bank doesn't negotiate with you
there's a couple of options you can take.
The first one in this instance is
perhaps looking at fixing your rate
because most of the banks have offered better,
lower fixed interest rates rather than variable rates.
And that's because the funding they get is a bit cheaper.
So they're able to offer slightly lower rates on fixed.
Fixing your rate means that you're agreeing to a rate
for a set period of time.
And, of course, the downsides might be
that in many cases you can't have an offset account.
You might not be able to make extra repayments.
And if you potentially want to break the contract
there might be some fees.
The other option, of course, is to switch,
and this is what the reserve bank governor
is actually encouraging people to do
if their bank or lender doesn't negotiate with them.
Switching is now easier than it's ever been before.
The banks will actually do most of the paperwork for you.
And open banking is this new scheme
that's been introduced where your personal information,
if you agree to it,
can be delivered from one lender to another.
And so it makes it quite easy for you,
as the customer, to move banks.
Just make sure that you're comfortable
with whatever you're agreeing to for your new bank.
And that it is a direct comparison.
- I know it might seem daunting
but it's worth giving it a shot.
- The worst that can happen is
that your lender potentially says no.
And in that case you can just decide
whether you're happy with your existing rate
or whether you'd like to look around and potentially switch.
So there's absolutely nothing that you lose from doing this.
So pick up your phone and call your bank.