Are you paying more in home loan interest than you need to? Are your mortgage repayments starting to overwhelm your household budget?

If so, it may be time to pick up the phone, speak to your lender directly and negotiate for a better home loan rate. If they're unwilling to match a better rate seen elsewhere or offer you a lower rate, it may be time to refinance.

Negotiating a better deal with your current lender is often called an internal refinance, or a repricing. Here we'll go through all the tips and tricks to haggle a lower home loan rate.

Why are home loan rates negotiable?

Lenders are often happy to lower the interest rate on your home loan because Australia's mortgage market is competitive - which can be a big lever when it comes to negotiating. If bumping your rate down a notch keeps you onboard, then your bank or lender will probably do it. It's much easier to retain you than it is to replace you.

You may have noticed new customers get a lower rate than you, a loyal customer. This is called rate creep, where existing customers see their rates go up. This could give you leverage at the negotiation table.

Most lenders won't spontaneously offer you a better rate - you need to ask for it. However, you may not always be guaranteed a lower rate. For example, if you have a low credit score, you're inconsistent with mortgage repayments, have gone through hardship arrangements in the past, or don't have enough equity, this may dissuade lenders from offering you a lower rate.

How much can you save by negotiating a lower rate?

Even a small interest rate discount could save you hundreds or thousands of dollars a year.


Tim has a loan of $500,000 (over 30 years) at an interest rate of 5.50% p.a. His monthly repayments are $2,838.

He notices his lender is offering a better rate of 5.30% p.a., so he decides to call them and ask for the new rate - he is successful.

At the new interest rate, Tim's monthly repayments have fallen from $2,838 to $2,776, saving him $62 a month. This is $744 a year.

Tim could also elect to keep paying his old minimum repayment, which would go a long way in shaving months or even years off the mortgage, which would save in interest costs.

You can calculate potential savings from refinancing with the InfoChoice refinance calculator.

While this is a hypothetical example, it goes to show that even a small discount really helps you save on repayments.

5 steps to negotiate a lower interest rate on your home loan

1. Are you in a good financial position to haggle?

Before you pick up the phone, take the time to review your financial situation. Are you an 'ideal' borrower in the lender's eyes?

Home loan lenders typically reserve their most competitive interest rates to 'ideal' borrowers.

Being an ideal borrower may include:

  • Having a loan to value ratio (LVR) of 80% or less
  • Having stable, full-time employment
  • Not having missed a mortgage repayment, or have even made more than the minimum repayment
  • Making principal and interest payments
  • Having a good credit history
  • Having solid equity in your home

If your financial position is strong, that's a good reason to invite your lender to the negotiating table.

Further, this only applies if you're on a variable-rate mortgage. If you are on a fixed term, you may not be able to break the loan lest you pay break costs. This can often amount to thousands or tens of thousands of dollars.

2. Research your current lender's rates

If you've been with the same mortgage provider for a while, then it could pay to look at what it's offering to new customers. Generally, a lender will reserve its most competitive rates for new customers to entice them to apply or refinance with that provider. If you've been with your lender for a few years, it's likely your rate will be higher than new customers.

Use your research as part of your negotiation when you speak to your lender and request a rate reduction. While you may not get the same rate as new customers, you could receive a small discount which will save you money in the long run.

3. Compare your rate with other loans in the market

Have a look at what other lenders are charging. This gives you a better idea of what sort of interest rate you should have and how your current rate compares to the rest of the market.

When researching rates from other lenders, consider the following:

  • Is the interest rate lower?
  • What fees does the lender charge on their home loans? Is it more than what you're paying now?
  • Do they offer similar or better features than your current loan? E.g. offset account, unlimited redraws, etc.
  • What is the comparison rate? Comparison rates may be able to give you a more accurate picture of what a home loan will cost.

Let your own lender know that you are aware of what is available in the market. But don't just say that you'll switch; tell your lender who you'll be going to and how much lower their rates are. This shows that the product is out there and that you're ready to make the move.

If they're unwilling to change your interest rate, you may have to consider refinancing with another lender. Be aware however that an external refinance might come with an additional set of costs to consider, such as a valuation, settlement or establishment fees.

4. Play the loyalty card

Having several years of loyalty, a positive history, and several different products with a lender can swing things your way when it comes to negotiating. It's true that lenders are always looking for new customers, but they're also more aware of how important it is to look after long-term borrowers, especially if they already have other products with them.

Tell your lender how long you've been with them and prove your reliability as a customer by highlighting your repayment history.

5. Begin negotiating

You should now be equipped to start negotiating for a better rate. Pick up the phone and say you would like a home loan interest rate reduction. Remember, be firm, but polite.

Start by explaining:

  • Why you're a responsible borrower,
  • How much you're paying as a loan customer versus what new customers pay, and
  • How much less competitors are charging for the same product.

If they won't budge at the end of your negotiation, it may be time to ask for a mortgage discharge form. This could be the final push your lender needs to lower your rate as it shows you're serious about switching lenders if they won't play ball.

In a competitive market, lenders will usually be willing to trim down your interest rate to keep you from refinancing elsewhere.

The products compared in this article are chosen from a range of offers available to us and are not representative of all the products available in the market and influenced by a range of factors including interest rates, product costs and commercial and sponsorship arrangements

InfoChoice compares financial products from 145 banks, credit unions and other financial institutions in Australia. InfoChoice does not compare every product in the market. Some institutions may have a commercial partnership with InfoChoice. Rates are provided by partners and taken from financial institutions websites. We believe all information to be accurate on the date published. InfoChoice strives to update and keep information as accurate as possible.

The information contained on this web site is general in nature and does not take into account your personal situation. Do not interpret the listing order as an endorsement or recommendation from us.  You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. If you or someone you know is in financial stress, contact the National Debt Helpline on 1800 007 007.