How to secure your own massive rate cut
In the last week, the big four banks have all reported their profits and the results have been underwhelming. Bank profits are moderating as a result of increased competition in the home loan market. Borrowers are getting smarter about home loans and more aware of the full range of lenders and home loans available to them. Many borrowers are demanding – and getting – big rate cuts from their lender.
What rate cuts are banks offering?
Firstly, banks and credit unions are not offering anything. In public and on their websites, the banks offer you the standard variable rate or a fixed rate. However most people end up paying a lower rate because they receive a discount. The discounts being demanded by borrowers have been getting bigger.
Five years ago, banks commonly gave customers discounts of 0.7 to 0.9 percentage points off their advertised headline rates, Fairfax media reports.
Now, in 2016, banks and credit unions are giving borrowers much bigger discounts to keep their business. Rate discounts of 1.2 to 1.4 percentage points are common. Bendigo Bank's chief executive Mike Hirst said last week he had heard of 1.7 percentage point discounts.
How can I get an interest rate cut?
These big interest rate discounts don’t go to all borrowers. They only go to those customers who are shopping around for a refinance deal, a new loan or are threatening to go to another lender.
Step One: The first step to getting a rate discount is to research the market and get to know what the competition is offering. Infochoice lists hundreds of loans from all of Australia’s significant home loan providers. Compare your own loan with others that seem suitable for your needs. The lowest rate home loan in the market now is offering variable rates well under 3.5 per cent.
Step Two: Talk to your own lender. Talk about how you are taking your business elsewhere to get a better rate. About how you want to refinance in order to save yourself thousands of dollars.
Step Three: Your bank will probably offer you a deal to keep your business and you will say thank you. If your bank can’t give you the deal you want, you have plenty of alternatives.
The squeaky wheel gets the deal …
Not all customers get rate discounts from their banks, because not all customers ask for rate discounts. However more and more customers are waking up to the fact that there are better deals out there. They are demanding rate cuts and getting them from their bank. That is one big reason why big bank profits are not as impressive as they used to be.