Will banks and lenders negotiate a better rate if I ask? The simple answer to this question is you probably can negotiate your way to a better mortgage rate, but as with all financial questions, there’s a lot more to it. You stand a much better chance of coming home to a cheaper deal if you know what you’re doing. Why are loan rates negotiable? The Reserve Bank reported last week that most Australian home loan borrowers do not pay the full advertised home loan rate. Lenders are often happy to lower the interest rate on your home loan because Australia’s mortgage market is saturated. If bumping your rate down a notch keeps you onboard, then your bank or lender will probably do it. The fact that the market is so competitive is one of your biggest levers when it comes to negotiating. You should also bring a few more things into play before you start, though. Do your homework If you know how much your property is worth and how much it’s likely to increase in value over the term of the mortgage, you’ll have another advantage. Find out about the factors that drive up property prices, like access to new transport hubs or planned shopping complexes and similar amenities. There’s also the property itself; if it’s a good-looking, structurally-sound building in a thriving area, you’ve got a good case for a better deal. Your lender will want properties like yours on its books. Check out your lender’s new interest rates If you’ve been with the same mortgage provider for a while then it could pay to look at what it’s offering its new customers, as well as what other lenders have to give. If you can present evidence of lower rates to your lender, it could persuade them to meet you at least halfway. The UBank UHomeLoan, for example, if offering a discounted loan from 29 October to both new and existing customers. It’s dropping its current 3.09 per cent rate to 2.84 per cent on owner occupier P&I mortgages of at least $200,000. There is also the option of flexible repayments, a redraw facility and no application or maintenance fees. Compare your rate with other loans in the market Have a look at what other lenders are charging and compare it with your own rate. Let your own lender know that you are aware of what is available in the market. Show that you know your stuff Lenders, if they see that you know what you’re talking about, are more likely to give you a discount. They may suggest a slightly higher one than you’re asking for, but you might well expect this. Ultimately, when it comes to lowering your rate or losing your business, most lenders will choose to keep you on. Which lenders will negotiate a home loan rate? All of them! You’ll have varying success, no doubt, but all of Australia’s lenders will be prepared to talk about lowering your rate, even if you’re a new customer. The big four banks, Commonwealth, Westpac, NAB and ANZ are particularly well known for offering discounts to borrowers who ask. Know your own limits Most borrowers have a limit, above which they can’t go because their monthly repayments will become unaffordable. If you know how much you can comfortably afford and you sound confident about not going over it, even if it means going to another provider, then an existing lender will probably respect that. Just pick up the phone You don’t need a reason to call your lender to ask for a lower rate other than just wanting one! Just pick up the phone and start talking. Realistically, unless you’re very lucky indeed, your lender isn’t going to just offer you a lower interest rate out of nowhere, but they’re not going to raise the rate because you ask for a rate cut, so you have nothing to lose. Even if you manage to lower your rate by 0.25 or 0.50 per cent, this could mean big savings over the rest of the loan term, so gather your facts and pluck up your courage. If you have a loan of $450,000 at an interest rate of 3.10 per cent and you lower it to 2.89 per cent, for example, then your monthly payments will reduce from $2,157 to $2,064, saving you $93 a month. This is $1,116 a year which, maintained over the next 25 years or so, is a total of $27,900. You can calculate potential savings from refinancing with the InfoChoice refinance calculator. If I have a great credit rating can I get a better rate? Nothing is ever certain but having a long history of on-time repayments and maybe even some overpayments will always help you to get a better deal. Your lender might be more inclined to drop your interest rate if you can demonstrate that you’re a low–risk borrower. I’ve been with the bank for years; can I get a loan discount? Again, while it’s not a dead cert, having several years of loyalty and several different products with a lender can swing things your way. 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. At the very least, you could get a lower fee on your credit card or cheaper insurance. It never hurts to ask. Be ready to move 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. It’s much easier to retain you than it is to replace you… My credit rating isn’t great; can I get a loan discount? It always seems unfair that you’re punished for a patchy credit rating by being hit by higher interest rates, but this is the measure of how risky a lender deems you. If you’ve recently been denied a lower rate, then it could be that you need to prove yourself a bit more. Order a credit report and work on improving it before asking again. 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.