According to research from financial services comparison site, Mozo, seven in 10 Australians have scored a better interest rate on their home loan, just by asking for it. The average interest rate cut was 0.50 per cent.
A home owner making principal and interest repayments on a $350,000 home loan at the average variable rate of 4.35 per cent would pay $277,243 in interest over the life of a 30-year loan, based on Mozo’s calculator. However, if they achieved a 0.50 per cent cut, the interest paid would reduce to $240,698, meaning a yearly saving of $1,200 or $36,000 over the life of the loan.
“[This] is a significant windfall considering how long it takes to pick up the phone and ask your lender for a better deal,” said Mozo marketing director Kirsty Lamont.
However, most Australians aren’t asking for the discount.
“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,” Ms Lamont explained.
“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 continued.
Given that most pundits predict the next official cash rate move will be up, Mozo suggests borrower think about having “the talk” sooner rather than later.
“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,” Mozo product data manager Peter Marshall said.
How do I do it?
Mozo suggested borrowers push the lender for a better rate, even if the initial discount sounds tempting: “Chances are, it’s not the best they can do.”
Borrowers should also consider asking their lender to price-match better offers on the market and likewise, should consider offering to bring their credit card, super or home insurance over to boost the negotiating position.
However, Mozo warned the cheapest option isn’t always best.
“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,” Mozo said.
If the lender isn’t willing to negotiate, then it could be time for a change, Mozo concluded.