Mortgage wars: how borrowers are getting a home loan discount without refinancing

September 19, 2023

The cash rate is widely tipped to have reached its peak, but that doesn’t mean it’s all downhill for borrowers.

Mortgage Choice data shows lenders have continued to lift rates out of cycle on some fixed- and variable-rate home loan products, despite no move by the Reserve Bank of Australia for three consecutive months.

1

The cash rate has sat at 4.1% since June, but lenders are still making moves to their home loan rates. Picture: Getty


But there’s substantial savings to be made for borrowers who get on the front foot, and they may not necessarily need to refinance to reap the benefits, according to Mortgage Choice broker Deslie Taylor.

“Lenders are heavily focused on retention to keep that business on their books,” Ms Taylor said. “So our focus is every six months in my office we’re doing quoting for clients to get their existing lender to offer them a better interest rate.”

Ms Taylor says depending on factors such as a borrower’s loan to value ratio, a variable rate of 5.79% to 5.84% is considered competitive in the current market.

Lenders fight to retain customers

RBA data shows early signs that the so-called ‘loyalty tax’ has started to unwind, although existing borrowers are still paying more than new borrowers on average.

2

In July, existing borrowers were paying an average variable rate of 6.23% while new customers were paying 5.95% – a gap of 0.28%.

That’s narrowed from a 0.5% gap at the start of 2023, when existing borrowers were paying 5.46% on average, compared to 4.96% for new customers.

“Had we have had this conversation a month ago, I would have said for new-to-bank clients, the interest rates are fantastic and existing clients don’t feel the love, but right now, a lot of the lenders are showing them that love,” Ms Taylor said.

“We’re finding now – and it’s only been in the last couple of weeks that most of the retention teams have got on board – but you find that lender retention teams are offering better, competitive rates to retain clients.

“But how long is that going to last? Because historically, they will always offer new clients a better interest rate than an existing client.

“The thing is, the lender will – depending on what business they want – they will adjust their interest rate to be either best in market or in line with market to achieve market share. And once they’ve got their market share they’ll adjust their rates accordingly. So it’s really just a game.”

Last month, Australia’s largest mortgage lender, the Commonwealth Bank, said retaining existing customers is a key focus for the bank as a large proportion of fixed-rate home loans expire in the months ahead.

With fewer cashback deals now on offer, which subsidise or cover the cost of refinancing, Ms Taylor says switching to a new lender may not always financially stack up.

“It all depends on what the cost is, versus the saving,” she said.

“If you’re looking at 0.5% or something crazy, obviously there’s a financial benefit to refinance.”

3

Borrowers who haven’t refinanced since interest rates began rising may be paying a premium. Picture: Getty


While an interest rate discount of 0.5% may not sound like much, Ms Taylor says over the life of the loan it amounts to a $58,000 saving for a borrower with a $500,000 home loan.

On a $750,000 mortgage the savings add up to $87,500 over the loan life, and a borrower with a $1 million home loan could reduce their interest bill by $116,000 by getting a 0.5% discount on their home loan.

But the savings could be even more substantial for borrowers who have remained complacent over the past 18 months.

RBA data shows the average owner occupier variable home loan was sitting at 2.86% in April 2022, before the first cash rate hike.

Had their lender passed on each hike in full, their mortgage rate would now sit at 6.86%, more than one percentage point higher than the most competitive rates on the market.

 

Source: realestate.com.au

 

You might be also interested in

Article Banner
If housing is so undersupplied, why are some markets falling in value?
The current state of the Australian housing market is often characterised as undersupplied. Supply is at the centre of government policy approaches to housing, and the latest reporting from Housing
VIEW POST
Gettyimages 1922023181
Here we go again: Shipping disruptions could pose major risk to interest rate cuts
‘Left of field’ shocks to global supply chains such as the tensions playing out in the Red Sea are the biggest risk to inflation and interest rates, the Reserve Bank
VIEW POST
Cover
Construction cost growth ‘returns to trend’
A reacceleration in the quarterly pace of growth for national construction costs is suggested to be a return to trend rather than a new surge, according to CoreLogic. The Cordell Construction
VIEW POST
1
Rental market to reach ‘tipping point’ in 2024: Domain
Domain’s Dr Nicola Powell told the Savings Tip Jar podcast the rental market will likely ease some time next year as more renters buy property or move into share houses,
VIEW POST
A
Monthly Housing Chart Pack – January 2024
Here are the must know stats, facts and figures on Australia’s residential property market. Annual growth in home values have seen ups-and-downs while rent values have increased at more than
VIEW POST
A
6 strategies to help you renegotiate your home loan and save money
Home loans are at their most expensive in 11 years, prompting a mad scramble among heavily mortgaged homeowners to either switch lenders or negotiate a better deal with their existing
VIEW POST
2
Richmond: Where you’ll find everything from cheap street food to luxury furniture
Richmond’s Barkly Gardens are popular with locals. Photo: Greg Briggs Bridge Road is back. The news from Richmond has the ailing retail strip shucking off the doldrums and getting a
VIEW POST
F
Home prices set to break new records in 2024, with three cities tipped to outperform all others
Stage three tax cuts, soaring population growth and lagging housing supply could see national property prices rise up to 4% over 2024, and as much as 8% in some capital
VIEW POST
Cover
Monthly Housing Chart Pack – December 2023
Each month the CoreLogic Research team puts together a Housing Chart Pack, with all the latest stats, facts and figures on the residential property market, such as the combined value
VIEW POST
1
Aussies amp up energy efficiency in homes as cost of living soars
With the cost of living higher than it has been in decades, homeowners and renters are looking for ways to reduce bills and save some money. Those living in homes
VIEW POST

Get your Free Property Guide.

Here goes your text ... Select any part of your text to access the formatting toolbar.

Get your free Sales Report for Mortgage wars: how borrowers are getting a home loan discount without refinancing

Get your free Sales Report for Mortgage wars: how borrowers are getting a home loan discount without refinancing

Subscribe to hear the latest

Start The Conversation Today.

Call us on:

1300 850 730

Request a Callback:

Send us a Message:

Privacy Policy

Get your Free Property Guide

Get your free Suburb Report for Mortgage wars: how borrowers are getting a home loan discount without refinancing

Privacy Policy

Who we are

Suggested text: Our website address is: https://motionproperty.com.au.

Comments

Suggested text: When visitors leave comments on the site we collect the data shown in the comments form, and also the visitor’s IP address and browser user agent string to help spam detection.

An anonymized string created from your email address (also called a hash) may be provided to the Gravatar service to see if you are using it. The Gravatar service privacy policy is available here: https://automattic.com/privacy/. After approval of your comment, your profile picture is visible to the public in the context of your comment.

Media

Suggested text: If you upload images to the website, you should avoid uploading images with embedded location data (EXIF GPS) included. Visitors to the website can download and extract any location data from images on the website.

Cookies

Suggested text: If you leave a comment on our site you may opt-in to saving your name, email address and website in cookies. These are for your convenience so that you do not have to fill in your details again when you leave another comment. These cookies will last for one year.

If you visit our login page, we will set a temporary cookie to determine if your browser accepts cookies. This cookie contains no personal data and is discarded when you close your browser.

When you log in, we will also set up several cookies to save your login information and your screen display choices. Login cookies last for two days, and screen options cookies last for a year. If you select “Remember Me”, your login will persist for two weeks. If you log out of your account, the login cookies will be removed.

If you edit or publish an article, an additional cookie will be saved in your browser. This cookie includes no personal data and simply indicates the post ID of the article you just edited. It expires after 1 day.

Embedded content from other websites

Suggested text: Articles on this site may include embedded content (e.g. videos, images, articles, etc.). Embedded content from other websites behaves in the exact same way as if the visitor has visited the other website.

These websites may collect data about you, use cookies, embed additional third-party tracking, and monitor your interaction with that embedded content, including tracking your interaction with the embedded content if you have an account and are logged in to that website.

Who we share your data with

Suggested text: If you request a password reset, your IP address will be included in the reset email.

How long we retain your data

Suggested text: If you leave a comment, the comment and its metadata are retained indefinitely. This is so we can recognize and approve any follow-up comments automatically instead of holding them in a moderation queue.

For users that register on our website (if any), we also store the personal information they provide in their user profile. All users can see, edit, or delete their personal information at any time (except they cannot change their username). Website administrators can also see and edit that information.

What rights you have over your data

Suggested text: If you have an account on this site, or have left comments, you can request to receive an exported file of the personal data we hold about you, including any data you have provided to us. You can also request that we erase any personal data we hold about you. This does not include any data we are obliged to keep for administrative, legal, or security purposes.

Where your data is sent

Suggested text: Visitor comments may be checked through an automated spam detection service.

Get your Free PDF copy of Make Money Simple Again