RateCity research director Sally Tindall (pictured) says preparedness is the key to seeking a better home loan interest rate. Pictures supplied/Shutterstock
RateCity research director Sally Tindall (pictured) says preparedness is the key to seeking a better home loan interest rate. Pictures supplied/Shutterstock

A tale of two cities has been playing out across the nation in an effort to get inflation back under control seeing some households dip into their savings instead of making cutbacks while others are scraping together every spare dollar they have.

According to RateCity’s research director Sally Tindall, the harsh reality is that some families will need to call their bank and other providers to ask for hardship assistance, but for others, relief in the form of an interest rate cut might get them through.

“If you’ve had your home loan for more than a year, chances are you’re on a higher interest rate than someone who has recently refinanced.

“That’s because while banks are busy hiking variable rates … many of them have been cutting new customer rates to keep business rolling in the door.”

A hefty $18.62 billion home loans were refinanced in January, and Ms Tindall said it’s a huge pot of money that banks all want a slice of, particularly if it means pinching a customer from a competitor.

“But perhaps more importantly, the last thing they want is to find themselves on the other side of that equation,” she said.

Lance Goodman, CEO of Compare Club, said that when comparing the latest new customer deals with ‘the big four’ banks, there is a cost to Australian households who don’t shop around.

“Our brokers are also finding that, for existing mortgage holders, lenders will rarely match the best rate that they’re advertising to new customers unless the homeowner says they’re switching banks.

“It means that mortgage holders have to often go through long negotiations just to be treated the same as a new customer.”

Mr Goodman said lenders were falling over themselves to entice new customers, and some of the offers in the market were really attractive.

“By exploring your options and comparing deals, you may be able to find a home loan that not only offers a better interest rate but also comes with added benefits like cashback,” he said.

Take seven steps to more financial freedom and stability
Take seven steps to more financial freedom and stability

A guide to haggling

Ms Tindall’s advice is to do your research, as the more you know about your options, the more likely your bank will take you seriously.

  • Check what rate you’re paying
  • Check what your bank is offering new customers
  • See what other lenders are offering
  • Call your bank and haggle

“Tell your bank how much higher your rate is compared to what’s on offer to new customers and that you want this lower rate (feel free to be bolshy and ask for even less),” Tindall said.

“Be sure to name-drop a couple of competitors; if they hear you’re talking to a rival bank, they might be more inclined to take notice.

“If they don’t budge, ask to speak to the retention team – they’re the ones with the license to hand out bigger discounts.”

Take seven steps to more financial freedom and stability
Take seven steps to more financial freedom and stability

Know when to walk away

The sharpest rates are typically reserved for new customers, so if you want the biggest discount, you might have to make the switch.

If you are thinking of changing lenders, quickly check how much equity you have in your loan; as Ms Tindall said, this is often crucial in understanding your options.

“If you own less than 20 per cent of your home at today’s values, you might find you’re in mortgage prison, unable to refinance.

“That’s because most banks will charge you lenders mortgage insurance, which is likely to eat into any savings you might pocket, particularly in the short term,” she said.

However, owning up near 40 per cent of your home can put you in a good position regarding rates. “Use it to your advantage and take your home loan shopping.”

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