RBA interest rate cuts: How to get the best deal from smaller banks

With interest rates again falling to record lows, here’s what you need to know before you speak to your bank and demand a better deal on your loan.

As the big four banks again refuse to pass on the entirety of the Reserve Bank’s rate cuts, the gap in rates between bargain home loans and the major players has widened further.

Central bank boss Philip Lowe slashed the official rate by 25 basis points to 0.75 per cent on Tuesday, and some economists have said it won’t be lifted again for at least another two years.

Westpac, Commonwealth Bank, ANZ and NAB cut their variable mortgages between 13 and 15 basis points, while many of the smaller lenders continued a pattern of passing on the RBA’s cut in full.

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Treasurer Josh Frydenberg said Australians sick of being gouged should vote “with their feet” and ditch the big four, but refinancing with another lender is easier said than done.

Lending standards are tighter since the royal commission into the sector, and many might not have their finances approved now the goalposts have shifted.

But comparison site Canstar’s finance expert Steve Mickenbecker said customers had a shot at getting a better deal just by having a chat with their bank.

“Go to them with evidence that you know what you’re talking about and you’ve done your homework,” he told news.com.au.

Before Tuesday’s cut, Canstar’s website had 150 loans below 3 per cent and more are expected to fall, but most Aussies tied up with the big four are paying closer to 5 per cent.

Homestar Finance, Athena Home Loans and Auswide Bank all passed on the 25 basis points in full and now have a lowest variable rate well below 3 per cent.

With these low loans in mind, Mr Mickenbecker says you should ask your bank: “I know that I’m on a rate that’s still above 4 per cent and I can see that you’re offering rates to new customers that are around 3.4 to 3.5 per cent, what are you going to do for me?”

“That’s the start of your journey,” he said.

It may be difficult to get the rates on offer to new customers, but Mr Mickenbecker says you should be willing to try your arm with one of the smaller lenders.

“If you’ve got good equity in your property, you’ve got a good payment record, you’ve got a strong credit rating, and you’ve shown you can afford the loan, then there are plenty of lenders that want to lend you money,” he said.

There are more hoops to jump through in the post-royal commission world, but Mr Mickenbecker says consumers should remember these companies want your business.

“They’re all after market share, it’s just that the new customer has been getting all of the spoils,” he said.

“If you feel that you’ve been caught out with too big a rate increase as time passes, then you can always go and refinance again.”

Are you tempted to leave your bank for a smaller lender? Comment below. @James_P_Hall | [e-mail]