Want a better interest rate deal? Follow these steps

The Brisbane property market has been relatively resilient which is good news for borrowers looking to strike a better interest rate deal. Here are some tips from BDO expert Marie Ryan.

It’s no secret that interest rate rises have been relentless – 9 since May 2022 (taking the cash rate from 0.10 per cent to 3.35 per cent). But contrary to popular opinion, it’s not all doom and gloom.

Latest statistics released by the Reserve Bank show that, for the most part, Australians are in strong shape to weather the rises.

The key is a combination of reduced non-essential spending, planning and proactive research.

Although national property values have dropped 8.9 per cent from the April 2022 peak, the Brisbane market has been resilient and would need to fall a further -21 per cent before wiping out the Covid market gains.

This is good news for property owners who are benefiting from an increase in equity value – a strong position to be in when negotiating rates.

I’m commonly asked by clients how to get the best rate. I always suggest clients negotiate with their current bank first, beginning research six weeks in advance.

Most (but not all) banks are preparing for the influx of fixed rates maturing, offering reasonable rates as a retention strategy.  

Marie Ryan a director of BDO Finance Solutions and an accredited finance broker.

Proactively contact the bank armed with market knowledge - not just on your current bank but also on the lowest competitor rates available. Your current bank may be unable to match the lowest rate but will likely move closer to it.

If after negotiation your current bank’s rate is still too high, there are some great refinancing offers available. Before making the move, it’s important to weigh up moving costs. I suggest allowing for $1000 in associated moving costs for a variable rate loan - covering Government, bank discharge and new bank fees. Based on a loan of $800,000, a reduction of even 0.15 per cent would make up for refinance costs in the first year alone – and if refinancing to a bank with a cashback offer (average $3000), that’s an additional bonus!

Once you’ve negotiated the best deal for you, I recommend adding a small buffer to your loan repayment based on a 0.50 per cent higher rate to avoid future rate shock and to save interest. Small changes such as swapping from monthly to fortnightly repayments (at half the monthly repayment amount) also helps – as you pay an extra month’s repayment over the course of a year.

Marie Ryan is a director of BDO Finance Solutions and an accredited finance broker.