The easiest way to get your home loan lender to drop your interest rate

THE Reserve Bank has kept the official cash rate on hold again today, but this is how you can get an on-the-spot rate drop from your lender.

A QUICK Google search, a 15-minute phone call and a bit of tough talking is all it takes.

I’m the biggest home loan Scrooge you will meet — I’m regularly threatening my bank that I’ll move if they don’t give me a better deal and I mean it.

Despite the Reserve Bank of Australia board keeping the cash rate on hold today at 1.5 per cent it doesn’t mean you shouldn’t take action.

But what irritates me more than anything is that most of us borrowers are just plain lazy.

Lazy customers are likely to be paying more on their home loan because they have failed to ask for a better deal.

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We won’t get off our backsides and set aside a short pocket of our day to save what could amount to thousands of dollars over the life of a typical 30-year home loan.

Last week an email pinged into my work inbox alerting me that my very own bank had been thrilled to announced they were now offering new borrowers a wonderful new variable rate home loan interest rate of 3.79 per cent for owner occupiers with a loan-to-value ratio less than 80 per cent.

Many interest rate deals for owner occupiers and investors remain under the four per cent mark.

Stuff that — that’s me but not the “new customer” bit and I’m paying 4.02 per cent.

And let’s just say I’m not happy about it.

So this is what I did and you should do too to make sure you are not getting ripped off.

And trust me, some tough love with your lender almost certainly works.

Step 1. Steam started to come out of my ears when I saw a cheaper rate for new customers but not the existing, loyal ones. So I did this ... a quick online Google search to see what rates were going with other lenders, and sure enough there were plenty of deals cheaper than mine. I jotted a few down on a piece of paper.

Step 2. I then penned out a few notes including my existing home loan rate, the fact my bank had jacked up my annual fee by $100 a year and what another bank could offer me in terms of an annual fee and interest rate.

Mortgage costs can quickly add up if you don’t get a regular check on the fees and charges you are paying on your loan.

Step 3. I picked up my smartphone and dialled my bank. By now steam had stopped coming out of my ears, I was gathering my composure and prepared for a stern conversation with my bank.

Step 4. Once I got through I asked to speak to someone about my home loan from my bank’s “retention” department. After a short wait on the line they said no-one was available so they would phone me back by the end of the week.

Step 5. OK, not ideal but I was prepared to wait. Three days later and sure enough they stuck to their word. I wheeled off to the retention lady at other end of the line that I was getting a rough end of the stick and I deserved better. If she didn’t drop my rate I was packing my bags and I was outta there, like trying to escape a date gone wrong. I wanted a better deal or I was calling it quits.

Step 6. She grilled me a bit, saying lending costs had risen and they couldn’t give me a rock-bottom deal other lenders could. She asked me what other deals were out there and what another bank had offered me. I gave her one example of a bank prepared to give me a cheaper deal. I said to her give me some discount or I’m out.

If you do your homework you can end up saving yourself thousands of dollars on your home loan.

Step 7. A few more minutes waiting on the line and sure enough, she had come back, reviewed my loan and on the spot dropped my rate by 8 basis points to 3.94 per cent. While it wasn’t as low as the deal for new customers it was better than nothing and a big enough drop to stop me from switching lenders for the moment.

Step 8. That’s all it took, a bit of tough talking to save me some serious dollars. On the typical $300,000 loan with a 30-year period and paying an annual fee of $299 that’s a saving of nearly $5000. And that’s $5000 better surely is better in a customer’s pocket than the bank’s. So take action now and avoid paying more than you need.

@sophieelsworth