In this current environment, the bank might offer you a 0.8% discount off their standard variable rate in the knowledge most people will not ask for more – but a mortgage adviser may well be able to get you something like a 1.0% discount depending on your circumstances.
Complacent mortgage holders who aren’t capitalising on low interest rates and intense lender competition could be costing themselves the opportunity to save potentially tens of thousands of dollars long-term.
Many borrowers are unaware that any discount from the lender’s standard variable rate they secure now will stay with them with that lender in future years. Understanding this concept should encourage anyone with a home loan to find out if they are getting the best deal possible for them. Working out whether you can get a better deal on your home loan is one of those things that often ends up in people’s ‘too hard’ basket – it’s seen as being a difficult and tedious process. However, a quality mortgage adviser will do all the hard work for you and should be able to secure you an interest rate below what you would get direct from the bank.
In this current environment, the bank might offer you a 0.8% discount off their standard variable rate in the knowledge most people will not ask for more – but a mortgage adviser may well be able to get you something like a 1.0% discount depending on your circumstances. Take the example of a $350,000, 30 year loan at an 80% lend. The standard variable interest rate on offer is 5.45% and a borrower, who goes direct to their lender, secures a discount of 0.8%, making the rate 4.65%. However, a second borrower uses a mortgage adviser who is able to secure a discount of 1.0% to make the interest rate 4.45%. As a result, the second borrower saves a total of $7130 in interest over the life of the loan (if the rate stayed the same).
And even when rates start to rise again, which they will at some stage, you’ll have the benefit of always getting that 1.0% discount off the prevailing standard rate. Even if rates were to go back up to 7% in the next couple of years (which is the average variable rate in Australia in the past 15 years), the first borrower would be paying 6.2% but the second borrower would be paying 6% and continuing to save a considerable amount of interest.
You only lose the discount off the prevailing rate if you refinance to another lender at some stage. This reinforced how important it is for mortgage holders to become active in considering their home loan options.
There is certainly a lot more to consider than just the interest rate when working out which home loan might best suit your needs. But at a time of record low rates and strong lender competition, this could be a very rare opportunity to save you and your family potentially thousands of dollars.