Is now the perfect time to have “the talk” with your home loan lender?

Wednesday 06 June 2018

Article by Ben Tosi

Having “the talk” might be awkward, you may feel uncomfortable and in the end, tears could indeed be shed. But Mozo’s recent research has indicated that they’re more likely to be tears of joy not sadness, with seven in 10 Australian home loan hagglers successfully negotiating a cheaper interest rate on their home loan.

A couple having the talk - is it time to do the same with your bank?

As good as that sounds, the bad news is that not enough of us plucking up the courage to call up our banks and haggle for a better deal, despite the mammoth savings that are on offer.

“Two thirds of existing mortgage holders have not haggled with their lender in the past two years, indicating a large chunk of borrowers could be getting some serious savings simply by picking up the phone,” said Mozo Director, Kirsty Lamont.

The survey of close to 1,500 homeowners also revealed an average rate cut of 0.50% for the 70% of hagglers who were successful.

RELATED: The magic home loan number you need to know

“Our results are a glimmer of hope to those borrowers who might have thought haggling with their lender is too intimidating or too difficult. There is a relatively high chance of success if you simply ask,” she said.

How much could you save?

Before you sit down to have “the talk”, you’ll want to know exactly what’s at stake or how much you could potentially save.

Well, according to Mozo’s home loan repayments calculator, an owner occupier making principal and interest repayments on a $350,000 mortgage at the average variable interest rate in our database of 4.35% would pay $277,243 in interest over the 30-year loan.

But call up your provider and haggle your way to a 50 basis point (or 0.50%) rate cut and you’ll pay just $240,698 in interest on the exact same loan - an annual saving of $1,200.

“This equates to a saving of $36,000 over the life of the loan which is a significant windfall considering how long it takes to pick up the phone and ask your lender for a better deal,” said Lamont.

Why you shouldn’t wait

There’s never a bad time to haggle with your current lender, but with rates already rising, you should reach for the phone as soon as possible.

Mozo’s Banking Roundup for May revealed that the majority of changes across the market were variable rate increases rather than cuts - the first time that has happened since July last year, and an indication that lenders are looking to slowly, but surely, hike rates.

This comes in spite of the RBA electing to keep official interest rates frozen at it’s June meeting yesterday. Product Data Manager at Mozo, Peter Marshall, believes funding costs could be a reason behind the gradual rate rises.

“We’ve seen a lot of evidence of variable rates increasing and analysts are saying that there will be a lot more of them to come as banks seek to claw back increased funding costs.”

How to have “the talk”

Ready to get yourself a rate cut? To help you prepare we’ve written this comprehensive guide to home loan haggling, including the kinds of things you can say to get a deal over the line.

But in the meantime, check out some of our top tips:

  • Drive a hard bargain: Even if the first discount your lender comes back with is tempting, always ask for more because chances are, it’s not the best they can do.
  • Price match: Ring around or hop online to compare what rates you can get elsewhere and quote these back to your lender in your negotiation. Potentially, the lender will price match their competitors to stop you from walking away.
  • Bundle: Bringing some of your financial products - like your credit card, super or home insurance - over could potentially strengthen your negotiating position and help secure a larger discount.
  • Don't always go for the cheapest option: Going for the cheapest rate on the market could see you miss out on other loan features - like an offset account - which could also lead to huge savings over the life of the loan.

And if after all that, your home loan lender isn’t prepared to offer you a better deal, maybe it’s time for a change, so start by checking out a bunch of popular options using Mozo’s refinancing home loans comparison table.

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