More Australians than ever before are taking advantage of rock bottom rates and negotiating a better deal on their home loans. It can often be as simple as asking the question: ‘Is this the best you can do?’
So, why aren’t more Australians lacing on their best negotiating shoes and stepping up?
A survey by home loan comparison site Lendi, shows 77% of people think banks have the most power in the home loan market. This perception of power may account for the gap of between the 79% of respondents that ‘would’ change for a better deal and the 36% who actually do.
The most recent data from the Australian Bureau of Statistics shows an enormous surge in home refinancing in May. The total value of these refinanced home loans exceeded $15.1 billion, up 26% from the previous high of $12 billion the month before.
Insights manager at Finder, Graham Cook, encourages those with a home loan to reassess what they are paying. Cook says: “The best home loan rates now start with a 2. If yours does not, it might be time to go home loan shopping”.
Finder suggested the fear of pursuing a refinance may be in the perceived effort of seeking one as well as the cost of breaking a fixed loan rate and, at present, the concern of how loss of income may affect loan approval.
Consider the average loan of $494,462. Finder analysis shows the average standard variable rate from the Big Four banks is 4.04%. If that rate were to drop 50 basis points to 3.54%, this would mean $36,287 saved over the life of the loan, making it well worth the work
Cook also says: “Now is a good time to ask for your bank to go the extra mile. Several lenders are offering to waive fees for new borrowers, and some are even offering extras like offset accounts at no additional cost.”
David Hyman, Lendi CEO, addresses the disconnect and power imbalance by saying: “The majority of Australians believe the distribution of power in the home loan market is unjust yet so many borrowers haven’t actualised their own power by bargaining or finding a better deal.”
Hyman highlights that while the ball is in the customers’ court, more than 1 in 2 Australians are unaware they are able to negotiate due to a complete lack of market transparency.
Finder suggests that 4 reasons to look into refinancing include:
- Paying a high interest rate.
- Seeking an offset account.
- Wanting to access extra cash.
- Struggling to meet repayments.
If you fall into any of the four categories above, it might be time to get on the front foot, take the leap and ask the scary question. Perhaps even speak with another lender.