I found around $300,000 in two-year forecast savings by reducing HOME LOAN interest rates for my clients – WITHOUT REFINANCING.
“It sucks that home loan interest rate is higher than the rate the bank is advertising online.”
“What? My friend just got a lower rate than me. And we are at the same bank!”
“How unfair. I caught up with my mates and their home loan interest rates are much better than mine.”
Familiar?
Here is the rub….when you got your home loan, your lender needed you and just as you needed your lender—Symbiosis.
Shopping around for home loan interest rates would have likely been undertaken with much gusto when you established your home loan. Good home loan interest rate. Happy customers.
But like many new relationships, the bliss slowly leaves the room. Feelings change.
So, what about you? Still feeling the love from your lender?
It may well be worth asking them if they still need you.
How did I save my clients home loan interest without refinancing?
I have helped a lot of borrowers through my mortgage broking career since 2008.
I decided to publish these forecast savings for everyone to see and learn from.
A few summers ago, I went into bat for my clients. We didn’t just lower home loan rates, we hit it out of the park!
These savings did not just happen to “other” people – the lucky ones. They happened to everyday borrowers.
To give you a guide my home loan clients were mostly 30 to 50-year-old professionals. Some with families, some not. They worked hard, might have an investment property or two, and the home loan interest cost was, for the most part, the biggest commitment they had.
How did I do it? Put simply, I just asked my clients’ lenders to stop for a moment and consider the value of their customer.
And there you have it, the secret sauce, “I contacted the lender.”
Sure, I knew what to say, when and how. But no discount offers came unless they were asked for.
These savings are a result of ACTION. Many borrowers can try and reduce their home loan rate for themselves. I show you how you can try for yourself in my Insider Guide.
“Think about how excited you get finding an a crumpled up $20 note in your jeans.”
How much did lower home loan rates save?
Instead of publishing the average discount I got for my home loan clients, I have forecast the amount of interest potentially saved through these rate reductions.
I saved clients from potentially paying $163,000 in home loan interest in the first year following their interest rate reduction.
If that peaks your interest, then have a look at the two year projected savings figure of $325,262.
So, without any action, these borrowers could have collectively paid over $300,000 over two years in “extra” home loan interest to lenders.
Not one borrower refinanced.
Not one borrower changed products.
Think about how excited you get finding an a crumpled up $20 note in your jeans. This money was the equivalent of lying under their mattress—I just helped them look for it.
My Insider Guide reveals how to ask the right questions to see if you can cash in on some home loan interest savings for yourself.
Refresher – Why is home loan interest charged?
We all know there is no such thing as a free lunch.
It pays to get a grasp of how home loan interest is calculated. Most borrowers will appreciate that it costs money to lend money – so lenders charge you for it.
Usually, the biggest cost of them all is the home loan interest. The higher the home loan rate the higher your interest cost.
Banks are in the game to make a profit. The fatter the better. When dealing with profit-related questions, Australian banks usually return the classic line, “….in the Interests of our shareholders….”.
It’s a business.
Rather than watch from the sidelines, borrowers can try to minimise their contribution to a banks profit—by reducing their own home loan rate.
Are you on the best home loan rate?
We haven’t met but based on likelihood, unless you are a new borrower, probably not. That is my experience in mortgage broking, and is also supported by a 2020 report by the Reserve Bank of Australia.
If you are on a variable home loan rate, and have been with your lender for a few years, you are more likely to have lost pace with the lower home loan rates offered to new borrowers.
The Reserve Bank of Australia (RBA) even did some numbers to support the feeling that existing borrowers were not getting as good a home loan interest rates as new customers.
What may have once been a great product fit and home loan interest rate, existing borrowers are often caught paying a loyalty tax—a term given to the “extra costs paid” by loyal, long-term borrowers.
Loyalty is admirable, but not at any cost. I am pretty sure your lender could survive if they made a little less from you.
It is worth noting, there can be instances where borrowers might be on a product that sits below current home loan rates.
My Insider Guide is designed provides a step by step walk through on how to ask for a lower home loan rate – including the research you need to do in just a few minutes.
Why are home loan rates higher for existing borrowers?
There can be many reasons why existing borrowers often find their rates out of touch with new home loan interest rates. Some are listed here:
- Focus on attracting new borrowers
- Economic conditions
- Bank profit margins
- Products
- Risk appetites
- Customer acquisition practises
- Loan to value ratios
Whatever the reason, the difference in home loan interest rates for existing vs new borrowers is often referred to as “loyalty tax”. Loyalty tax has become a fairly common practice where new customers get a much better deal than existing (loyal) ones.
Billions of dollars are estimated to be left on the table by inactive, loyal customers. It is not just the home loan industry where loyalty tax is evident. Consider other regular, recurring bills you might have like mobile phones, insurance and energy providers.
How much could you save by reducing your home loan rate?
So, what if you could pay less interest?
Say you got a 0.50% discount off your home loan interest rate. What exactly does that mean in dollar terms?
Whether savings are $50 per month or $3,000 per year—it is simply more money staying your side of the line.
I don’t know about you but making some savings on home loan interest costs sure beats working more! Or makes going to work as little easier.
If you could pay banks less interest per month then perhaps those extra savings could go towards YOU rather than lining the executives pockets – ahem, excuse me – company’s profits….for the shareholders right?
I hear you, “Show me the money!!!!” – Here is an illustration of how an interest rate reduction could translate to borrower savings:
This example shows how a 0.50% discount on a home loan of $600,000 could save this borrower around $6,000 over two years—why wouldn’t you see what discount you might get?
Not to mention bigger discounts at higher loan amounts. The savings over two years can be over $10,000.
If you paid less interest to the bank, perhaps you could see your loan repayments reduced and see these extra dollars translate to a bottle of wine each month. On the house (or bank in this instance)! How sweet, dry or oaky that would taste.
My article on how interest works explains how a reduction in home loan interest rates can result in an increase in home equity, savings or perhaps a reduction in required home loan repayments.
“….firm, fair and pleasant is usually where I see most success.“
Depending on your personal situation and level of interest rate discount negotiated you might see yourself net a relatively large amount of savings. In addition to your monthly wine-win any extra savings could go some way towards a holiday or childcare.
Home loan interest rate reductions are not the stuff of dreams or dreamers. This is real-life. I have done it and produced and Insider Guide so borrowers can try it for themselves.
Why did I improve home loan interest rates for borrowers?
I started mortgage broking in 2008, so I know a home loan is more than a “product”. Behind every home loan is usually a heck of a lot of hard work along with an impressive story.
I have seen the sacrifices people make borrowers make to become home owners. It could be changing lifestyle by going out less, living with parents (or worse still, in-laws) while you saved. Perhaps it was a renovation job that literally drew all the blood, sweat and all the tears you had.
Big achievement? Yes!
Paying for it – not so much fun.
You see the background context was that there was a Royal Commission into the conduct (some bad behaviour) of banks and seemingly overnight they started to consider that borrowers should be listened to. This provided the perfect time to challenge banks for lower home loan rates.
The result meant my clients had over 300,0000 reasons to celebrate.
Since the 2019 Royal Commission into banking, lenders have matured and developed their efforts to retain existing borrowers.
In more recent times, there has been extreme competition to attract new borrowers with cash incentives. The flipside many of my clients saw was a more concentrated effort by lenders to retain their business with improved home loan interest rates—and sometimes cash payments to stay.
Who can lower home loan rates?
Anyone can try.
Some borrowers have more chance of succeeding in lowering their home loan interest rate than others. My interest rate reduction guide outlines the “how to” as well as characteristics shared by borrowers who have successfully lowered their home loan rates.
You have seen what I achieved for my clients in a short space of time. It is possible for many borrowers to negotiate lower home loan rates on existing products—in fact it is a recommended approach according a 2018 ACCC report into bank competition.
Among the conclusions in this report was that interest rates set by the big banks for borrowers are OPAQUE and DISCRETIONARY. So, the rate you see in the shop window (website) is not always the rate borrowers are getting.
Whether you have a mortgage broker or not, contacting the lender to ask for a discount on your home loan interest rate can sometimes yield great results.
How can you lower home loan rates—without a refinance?
Put simply – you don’t ask you don’t get.
It seems that unless you are proactive in asking for lower rates it is unlikely you will get them given to you.
My Insider Guide on negotiating a lower interest rate is designed to give you a good chance of a home loan interest rate reduction.
It does not need to be confrontational – firm, fair and pleasant is usually where I see most success.
While a refinance home loan could be a preferred option for some, not all borrowers have this option. Here are three reasons borrowers might not consider a refinance and stay at their existing lender:
Mortgage prisoners
A term coined for borrowers who, for a multitude of reasons, cannot refinance even if they wanted to.
Bank preference
You might like the current home loan set up and would prefer to stay. Just want a better rate.
Too busy
Know it can be difficult to move banks and would prefer to stay than go through a refinance process. These borrowers, quite rightly still, want a fair go.
What if your bank could make you feel appreciated again?
I might just be a matter of your lender sharpening their pencil, right?
By using my mortgage broking knowledge, I have made it happen for many.
I have told many borrowers what to say when they approach a bank directly.
Whether this can happen for you will depend on various factors, but mainly your product type, conduct and your proactiveness.
If you are willing to try and reduce your home loan interest rate, let me start with what I do know and what I don’t know.
I do not know you and your situation.
I do not know if your home loan rate will get an extra rate reduction. That depends largely on you and in part on your existing loan product. My Insider Guide outlines the type of scenarios I see having a successful negotiation.
I do know it is very unlikely that your bank will contact you proactively to offer a discount for your loyalty. Can you see them calling you out of the blue with an extra discount reward as a thank you for your loyalty, for not bothering them when they are busy getting new customers, and always paying your mortgage on time, every time?
It is up to you to ask them if you are still worth it. You could discover you are an important part of their lending portfolio.
Final word
If contacting the lender is not for you, or you feel you situation needs some to be discussed prior to taking action, there are licensed mortgage brokers ready and willing to assist.
If you would like me to introduce you to a licensed professional send through your details here:
How did I calculate projected savings?
It can difficult to put into to numbers the anticipated savings for borrowers.
So, to calculate forecast savings I used the following data to calculate home loan interest savings:
- Actual interest rates before and after discount
- Assumed 25yr loan term remaining
- Minimum P&I monthly repayments based on loan balance
References
Australian Competition & Consumer Commission 2018, Lack of transparency stifles mortgage price competition
https://www.accc.gov.au/media-release/lack-of-transparency-stifles-mortgage-price-competition
Reserve Bank of Australia 2020, Statement on Monetary Policy – Do Borrowers with Older Mortgages Pay Higher Interest Rates?
https://www.rba.gov.au/publications/smp/2020/feb/box-c-do-borrowers-with-older-mortgages-pay-higher-interest-rates.html
Royal Commissions 2019, The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry
https://www.royalcommission.gov.au/banking/final-report
