In real estate, everything is negotiable, including your mortgage.
While many lenders have withdrawn cashback incentives in recent months, there are still large discrepancies between the best and worst mortgage offers in the market, which means many borrowers are paying too much.
Sebastian Watkins, co-founder of online mortgage broker Lendi, said customers were saving an average of 66 basis points when refinancing.
“That’s unwinding the last two and a half rate rises, which I’m sure everyone would be happy with,” he said.
“There’s always money to be saved.”
The Reserve Bank lifted the official cash rate on Tuesday to 4.35%, the highest level since 2011. It was the 13th rate rise since mid last year, marking an extraordinary period of fast-rising repayments that is pressuring many households.
While a short-lived era of fierce home loan rivalry between lenders appears to have dissipated, many lenders are still reporting elevated levels of competition, which is good for customers.
Banks are aware that many mortgage holders have recently come off low fixed rates, and are actively looking for a better deal than the variable rate their lender has tipped them in to.
Steve Mickenbecker, group executive at comparisons site Canstar, said it pays to be prepared when approaching your lender.
“Awareness of what deals are available is convincing evidence to your current lender that you are seriously considering the option of switching to a new home loan provider,” he said.
“So know which lenders are offering the best deals.”
Canstar recommends getting finances in order before asking for a better deal, which includes making sure all credit cards and bills are up to date. Understanding your borrowing capacity and credit score are also helpful.
Mortgage holders have two main options when looking for a better deal; they can ask their current provider for a more competitive rate or look elsewhere.
When refinancing, which involves moving loans or accessing built up equity, the customer would need to qualify in a similar process to a mortgage application.
“Your lender will probably offer a discount from your current rate but chances are that it won’t be enough to take you into the same range as the better rates in the market,” Mickenbecker said.
“Be prepared to call their bluff and start the application process with other lenders.”
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Canstar lists 94 home loans with interest rates below 5.75%, although many of those products will add the most recent quarter-point cash rate increase to their rates in the coming weeks.
A competitive rate can be sweetened with a cashback, which tends to range between $2,000 and $4,000 for switching providers, although some lenders will offer it to existing clients as a means to keep them.
While ANZ is the only big bank still offering cashbacks, Westpac-owned St George, Rams, Bank of Queensland, Bank of Melbourne, IMB and ME Bank are among the other lenders still promoting the cash enticement, according to Canstar data.
National Australia Bank was the first major bank to announce it would pass on Tuesday’s rate increase in full, with the increased rate coming into effect on 17 November.
One aspect that might trip up householders is the serviceability buffer, used to help determine borrowing capacity, after a period of such rapid rate rises.
While some lenders want customers to meet the industry buffer, which tests whether a borrower can make repayments at 3 percentage points above the lending rate, some will accept a 1 percentage point margin if the customer is considered reliable.
Angus Gilfillan, chief executive at broking group Finspo, said the difference between competitive and uncompetitive rates has widened.
“Simultaneously, while official interest rates are on the rise, Finspo is witnessing greater diversity in lender pricing and offerings within the market,” he said.
“This phenomenon marks a notable departure from the usual trends.”
