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Desperate lenders giving secret 2.41% mortgage discounts

·4-min read
Compilation image of aerial view of houses, pink piggy bank on a pink background, pile of Australian dollar notes and people walking across a street
Lenders, in many cases, would rather lose out than lose your business. (Source: Getty)

Australia’s largest lenders are secretly giving never-before-seen Reserve Bank of Australia (RBA)-beating mortgage discounts to stem a borrower exodus.

The number of Aussies refinancing to combat the eye-watering rise in interest rates has reached an all-time high. Australian Bureau of Statistics (ABS) figures show a record $18.2 billion was refinanced in June alone, a six per cent rise on just the previous month.

A total $380 billion in mortgage money has now been taken off more-expensive lenders since the pandemic – and a home loan price war – broke.

That price war has now escalated to behind-closed-door discounts of as much as 2.41 percentage points off the advertised interest rate, mortgage insiders have confided to me, as banks scramble to protect their home loan portfolios.

This more-than-wipes the RBA’s to-date hikes. And some more are forecast to come.

Read more from Nicole Pedersen-McKinnon:

Our central bank has so far raised rates 175 basis points – or seven times and according to money markets, six more are likely to be ahead.

But forget fixed rates - they have already gone sky-high and will likely see your monthly mortgage repayment immediately jump up with variable rates likely to swiftly catch up.

The thing is, those money markets are actually forecasting rates will begin to fall come the middle of next year.

The lock-in ship has sailed… so it’s welcome indeed that lenders are suddenly competing so fiercely on variable rates.

How you can secure an instant one percentage point discount

There are two ways of getting an interest-rate discount with your existing lender.

And, yes, the first one will be immediate. Well, with perhaps a five-minute delay… I’m serious.

Borrowers are reporting that by simply picking up the phone and calling their lender, they are securing interest rate cuts of 100 basis points.

That cancels more than half of the rate rises to date.

Your script for success goes like this:

You: I’m a long-term customer of yours but I don’t feel like you appreciate me.

Your lender: You are valued and loved.

You: I don’t feel loved - I know there is a comparable, quality product (offering a real offset account) charging only 3.59 per cent, and that’s even after the recent rate rise comes in. My rate is far higher than this and I’m upset.

Your lender: Let’s see what we can do to reward your loyalty. Ah, yes 100-basis-points off is no problem at all. And a mortgage consultant will mow your lawn for the remaining life of the loan.*

That’s a pretty tremendous result for a quick – possibly cranky – conversation.

But you can probably do far better.

You just need to put your money where your mouth is to convince them. Ok, their money.

How to secure an overnight up-to 2.41 per cent discount

You need to threaten to leave. Properly.

You need to go so far as to line up a new lender – trust me, it will be worth it – and make sure your existing one knows about it.

That requires giving your existing lender’s mortgage discharge department a call or completing said form online.

Mortgage brokers are whispering to me that – in these make-or-break circumstances – dedicated ‘retention’ staff are swinging in to match your new mortgage terms, even though they stand to lose a fortune, they’d rather not lose your business.

They may not do it until the last minute though.

In any case, you have nothing to lose—you make a massive repayment saving if you leave or that saving, potentially, if you stay.

How much could I save?

As I mentioned earlier, a discount of 2.41 percentage points goes a fair way to mitigating the rises the RBA is expected to overall impose: 13… or 325 percentage points.

And don’t forget if rates then start to fall, you want your repayments to be variable so they fall with them.

But what kind of bottom-line benefit are we talking about?

On a fairly average $600,000 mortgage, a 241 basis point discount means going to repayments of $3,127 per month, down from $3,977 per month.

That puts $850 per month back in your pocket. Which pays for an awful lot of gardening.

* Your lender may not, in fact, offer free lawn mowing. But be aware that any new potential lender might well dangle a cashback to get you through the door. Additional incentives as high as $2000 are being paid, which might make it worth executing an actual lender ditch-and-switch.

Nicole Pedersen-McKinnon is the author of How to Get Mortgage-Free Like Me, available at www.nicolessmartmoney.com. Follow Nicole on Facebook, Twitter and Instagram.

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