RBA interest rate cuts: Three tips for a better mortgage loan deal
The RBA has kept the cash rate on hold at 1 per cent, but borrowers still need to pay close attention to their loans. These are the secrets your bank wants to keep from you.
Mortgage interest rates on variable and fixed loans continue to fall but pay close attention to your deal because there are many things your bank keeps secret from you.
The Reserve Bank of Australia’s governor Philip Lowe kept the cash rate on hold today at 1 per cent, however borrowers are being warned review their deals anyway.
Here’s three things your bank won’t be in a rush to tell you and it could make an impact on how quickly you could pay off your loan.
1. NEW CUSTOMERS GET BETTER DEALS
You might not realise this but there’s a darn good chance a new customer on the same loan as you is getting a much better end of the bargain.
Financial institutions reserve their best deals for new customers because they do everything they can to lure them in the front door.
Financial comparison website Mozo’s spokeswoman Kirsty Lamont said this was why customers should “keep an eye on the market and see what else is on offer”.
“If you think that banks reward you for being a loyal customer, think again,” she said.
“Unfortunately in Australia it’s all too often the case that banks reserve their best rates and hottest offers for new customers.”
She said unless you compared your mortgage every 12 months you might find the deal you were on was not nearly as competitive as it was when you signed up.
2. YOUR LOAN PERIOD
Most lenders offer customers loan terms of 30 years but some even stretch out to 40 years.
Don’t be fooled by this though — when taking a new loan or refinancing you are well within your rights to ask for a shorter loan duration.
MORE: Why customers are paying thousands extra in loan charges
Heritage Bank’s chief executive officer Peter Lock it was simply a case of talking to your lender and working out what suits you best.
“If you want your home loan over any period you can just say what you want it over, it doesn’t have to be 30 years, it could be 10, 15 or 20,” he said.
“The benefit of a longer term generally is a lower repayment, so the longer term you have the easier the repayment is.”
Of all Hertigage customers about 15 per cent take out a loan for less than the full term.
Mr Lock said typically customers hold a loan for six years before refinancing their mortgage or selling their property.
3. DEMAND A BETTER DEAL
If you think you can get a better deal from your lender you could ask at anytime.
But be mindful this applies more so to customers on a variable loan, if you were trying to change from a fixed rate deal you would be hit with costs including break fees.
Pick up the phone, call your bank and ask to speak to the retention team.
This is the mob of people designed to keep you banking with them.
Ms Lamont said for too long borrowers had become conditioned to thinking they were lucky just to get a loan.
“The reality is that banks are still making a motza out of mortgages, and they don’t want to lose your business,” she said.
“Knowing this you should be calling up your lender every 6 to 12 months to put them under the pump to give you a better deal.
“Go armed with the most competitive rates on the market and make them work for your money.”
Originally published as RBA interest rate cuts: Three tips for a better mortgage loan deal