How to save money and negotiate a better home loan deal

Consumers with needlessly high mortgage rates are throwing away hundreds of dollars each month, but it can be easy to get a better deal.

Exclusive: Mortgage customers are throwing away hundreds of dollars a month by sticking with high interest rates of over three per cent. 

The Reserve Bank of Australia governor Dr Philip Lowe recently said the cash rate — which dropped this month to a historical low of 0.1 per cent — would not rise until at least 2023.

But new analysis from financial services firm Canstar showed complacent customers are still being gouged.

The survey of more than 2000 Australians found the customers are paying an average home loan rate of 3.65 per cent.

While this is down from the 2019 average of 3.88, it is still almost two per cent higher than some of the best deals on the market.

Canstar’s database shows the lowest variable mortgage rate is just 1.99 per cent.

Mortgage customers are throwing away hundreds of dollars a month by sticking with high interest rates of over three per cent. Picture: iStock

Aussie Home Loans’ chief executive officer James Symond said paying 3.65 per cent was “too high”.

“These consumers, these mums and dads need to check in with their lender and mortgage broker to see if they can get a better deal,” he said.

“Lenders are only as loyal as you are in poking them for a better deal.

“There are rates out there at about 2.5 and 2.6 per cent and with up to $4000 cashback, so there are some marvellous deals out there for the right customers.”

Canstar’s data showed on a $300,000 30-year principal and interest loan if a customer’s rate dropped from 3.65 per cent to 1.99 per cent, the borrower’s monthly repayments would fall by $265 to just $1107.

At the height of the pandemic, many borrowers hit hard times and latest figures from the Australian Banking Association showed at the start of November the number of deferred loans had fallen by about 70 per cent since they were first offered back in March.

About 145,000 mortgages remain on hold with most repayment holidays due to end in February next year.

Aussie Home Loans’ chief executive officer James Symond said paying 3.65 per cent was “too high”. Picture: Britta Campion / The Australian

Canstar’s group executive of financial services Steve Mickenbecker said borrowers are “paying too much if they’ve been in an existing loan for a few years”.

“Every year you have to look at your mortgage because you fall behind as rates get lower,” he said.

“You can get down to 1.99 per cent on variable rates and you should be way closer to 2 than 3.”

Mr Mickenbecker urges borrowers to “pick up the phone today and negotiate hard”.

“Don’t take the first offer and don’t settle for anything average, make sure you are on a rate around 2.5 per cent or lower,” he said.

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@sophieelsworth

BEST VARIABLE LOAN DEALS

1. Reduce Home Loans, Super Saver Variable, 1.99 per cent.

2. Loans.com.au, Smart Booster Home Loan Intro 1 year, 1.99 per cent.

3. Illawarra Credit Union, Works Package Home Loan P & I 2 year intro, 1.99 per cent.

4. Pacific Mortgage Group, Variable P & I, 1.99 per cent.

5. Homestar Finance, Star Essentials, 2.14 per cent.

BEST 3-YEAR FIXED LOAN DEALS

1. QBank, Fixed Home Loan, 1.89 per cent.

2. RACQ Bank, Choices Residential fixed 3 years, 1.89 per cent.

3. UBank, UHomeLoan fixed 3 years, 1.95 per cent.

4. BankVic, Premium Fixed 3 years, 1.95 per cent.

5. IMB, Residential Fixed P & I, 1.97 per cent.

Source: Canstar, based on a $300,000 30-year principal and interest loan

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