The magic number: how does your home loan rate stack up

Over the past few years conventional wisdom has said that you shouldn’t be paying more than 4.00% on your home loan, but research hot from the Mozo database has revealed it’s time for a shift in thinking.

The research shows that 3.70% is now the benchmark for home loan rates which means if your rate is higher than this, you could be paying too much interest.

Despite the fact that half the lenders in the Mozo database currently offer an owner occupier rate at or below the magic number, many Aussies may still be paying too much on their mortgage, with the average rate sitting at a lofty 4.35%.

“By being on the lookout for more competitive rates under the 3.70% benchmark, homeowners have the potential to save hundreds of dollars a month and thousands of dollars on their home loan,” said Mozo Director, Kirsty Lamont.

In fact, taking that average and comparing it against the market-leading rate of 3.39% on offer from Reduce Home Loans’ Rate Lovers Variable Home Loan, we found that owner occupiers making principal and interest repayments on a $300,000 mortgage with an LVR of 80%, could save $164.66 each month.

And over the life of a 30 year loan, that same homeowner could save an almost $60,000 in unnecessary interest charges.

RELATED: Four out of five Aussies don’t know their home loan rate right now, says UBank

So if you’re keen to get yourself a cheaper deal on your home loan, how do you go about it?

Haggling your way to a better home loan rate

One way to secure a better rate, under the 3.7% benchmark, is by haggling your way to a better deal on your home loan with your current provider.

A Mozo mystery shop, conducted in October of last year, found that Australians could nab a discount of up to 0.82%* on their home loan rate - simply by asking for it.

“With savings as high $86,000 for refinancers*, that’s a sign you should definitely be asking for a better deal when you approach your home loan lender,” said Mozo’s property and home loan expert, Steve Jovcevski.

How to haggle on your home loan

  • Set the scene - Let your provider know why you’re calling and explain that you think you deserve a better deal on your current home loan.
  • Show your research - Make sure you’ve compared home loans on offer from the competition and ask for a price match. You might be asked what you’ve seen out on the market so be prepared to quote specific providers, products and rates.
  • Be prepared to walk away - If negotiations aren’t going in the direction you’d hoped, be prepared to walk away and refinance with another provider. Showing your lender you’re serious about a better deal might be just the motivation they need to keep your business.

Refinancing with another home loan provider

While the Mozo database has seen 22 lenders cut rates on at least one owner occupier loan since the start of the year, a lot of these markdowns are designed to get new customers in the door and therefore aren’t available to existing customers - which is where refinancing comes in.

“Homeowners should double check their mortgage rate and make sure they are not paying anywhere over 3.70%,” said Lamont.

“If you are paying more than that then it’s definitely time to review your options and look to refinance.”

RELATED: Australia's best refinance home loans for 2018

So if you’ve called, haggled your hardest and your home loan provider still won’t match the rate on offer downtown it might be time to refinance with a new home loan provider.

How to refinance to a cheaper home loan

  • Head on over to our Switch & Save Calculator: This handy tool compares over 100 home loans in our database that are available now.
  • Fill out your details: Next up, enter all your current property/home loan info from the loan amount to the property value and click “get results”.
  • Compare home loan deals: Once you have completed the above two steps, our calculator will take you to our home loan comparison page, which will show you some of the top home loan deals available for your situation and the savings you’ll make by switching.
  • Create a shortlist: Select a few that you like and compare them side by side looking at the interest rate, comparison rate, fees and features. You can click on the ‘more info’ text at the bottom of each product for additional information.
  • Start your application:  Once you’ve found a home loan that ticks the boxes for you, you can kick off your refinancing application by clicking on the ‘go to site’ button. This is located to the right of the product information. And you’ll be on your way to great savings.

We know that refinancing your mortgage is a big deal, so arm yourself with all the must-know information before you start the process using our refinancing tips and tricks guide.  

*Savings and discounts based on discounts from ANZ, NAB, Westpac and CommBank between 11 - 14 September 2017. Potential annual savings calculated for refinancer on a $500,000 loan over 30 years.